Hungary's Government Offers Financial Aid to Struggling Budapest Amid Fiscal Crisis
The Hungarian government prepares to provide financial support to Budapest amid reports of a near-bankruptcy situation, following discussions with city officials.
The Hungarian government has announced its readiness to extend financial support to Budapest, which is reportedly facing a fiscal crisis.
Csaba Latorcai, the Parliamentary State Secretary and Deputy Minister of the Ministry of Public Administration and Regional Development, made the announcement after the first talks with the delegation of the Budapest Municipal Government.
He emphasized the need for a comprehensive review of the city’s financial management, with discussions planned for the following week.
Latorcai stated, 'It is extremely important that the capital of the country remains operational, and that public services are accessible at the highest possible standard for all Budapest residents and visitors.' The discussions were prompted by the recent declaration from the Mayor of Budapest regarding the city's precarious financial status.
He noted that in 2019, when the leadership transitioned from István Tarlós to Gergely Karácsony and the left-wing majority, the Budapest Municipal Government had significant savings amounting to 214 billion HUF.
Furthermore, tax revenues of the Municipal Government are projected to more than double between 2019 and 2025, increasing from 160 billion HUF in 2019 to potentially exceeding 300 billion HUF this year.
Latorcai asserted that more money will remain with the Municipal Government in 2025 compared to that during Tarlós's tenure, and emphasized that the financial sustainability of the public transport system, particularly the Budapest Transport Company (BKV), hinges on the Municipal Government's decisions regarding its funding.
During the talks, Latorcai referred to statements made by the Mayor regarding the availability of sufficient funds for purchasing properties in the Rákosrendező area and the development it involves.
He pointed out that the Municipal Government had indicated a financial requirement of 50 billion HUF for BKV funding, a sum that corresponds directly to the amount spent on the property purchase, raising questions about the fiscal management of the Municipal Government.
The Municipal Assembly, with strong support from the opposition Tisza Party, approved a budget this year that allocated 50 billion HUF less than mandated by law for solidarity contributions, resulting in a budgetary imbalance.
The solidarity contribution that Budapest is required to pay to the national treasury will rise to 89 billion HUF by 2025, up from 75 billion HUF last year.
The Municipal Assembly voted against a proposal to fulfill the solidarity payment in full, leading to budgetary tensions that prompted legal action against the city
Budapest's budgetary situation has been compounded by plans for significant property redevelopment in the Rákosrendező area, which involve substantial financial commitments.
Latorcai noted that the government's initial plan to sell this land to an international investor for remediation work was undercut when the city exercised its right of first refusal, which now places the onus of cleanup costs on the Municipal Government.
In light of Budapest's precarious situation, Mayor Karácsony opted for a confrontation with the government rather than crafting a realistic budget, having previously orchestrated a brief shutdown of city transport services as a form of protest against government budget cuts.
On a broader financial note, the Hungarian government has updated its budget projections, expecting a budget deficit of 4.1% for the current year, an increase from the previously anticipated figure of 3.7%.
The government projects a decrease in the public debt-to-GDP ratio from 73.1% this year to 72.3% by 2025, with expectations of achieving a balanced primary budget by 2024. Recent consultations indicated that budgetary adjustments may be needed due to higher-than-expected operational costs and reduced tax revenue from anticipated GDP growth.
Csaba Latorcai, the Parliamentary State Secretary and Deputy Minister of the Ministry of Public Administration and Regional Development, made the announcement after the first talks with the delegation of the Budapest Municipal Government.
He emphasized the need for a comprehensive review of the city’s financial management, with discussions planned for the following week.
Latorcai stated, 'It is extremely important that the capital of the country remains operational, and that public services are accessible at the highest possible standard for all Budapest residents and visitors.' The discussions were prompted by the recent declaration from the Mayor of Budapest regarding the city's precarious financial status.
He noted that in 2019, when the leadership transitioned from István Tarlós to Gergely Karácsony and the left-wing majority, the Budapest Municipal Government had significant savings amounting to 214 billion HUF.
Furthermore, tax revenues of the Municipal Government are projected to more than double between 2019 and 2025, increasing from 160 billion HUF in 2019 to potentially exceeding 300 billion HUF this year.
Latorcai asserted that more money will remain with the Municipal Government in 2025 compared to that during Tarlós's tenure, and emphasized that the financial sustainability of the public transport system, particularly the Budapest Transport Company (BKV), hinges on the Municipal Government's decisions regarding its funding.
During the talks, Latorcai referred to statements made by the Mayor regarding the availability of sufficient funds for purchasing properties in the Rákosrendező area and the development it involves.
He pointed out that the Municipal Government had indicated a financial requirement of 50 billion HUF for BKV funding, a sum that corresponds directly to the amount spent on the property purchase, raising questions about the fiscal management of the Municipal Government.
The Municipal Assembly, with strong support from the opposition Tisza Party, approved a budget this year that allocated 50 billion HUF less than mandated by law for solidarity contributions, resulting in a budgetary imbalance.
The solidarity contribution that Budapest is required to pay to the national treasury will rise to 89 billion HUF by 2025, up from 75 billion HUF last year.
The Municipal Assembly voted against a proposal to fulfill the solidarity payment in full, leading to budgetary tensions that prompted legal action against the city
Budapest's budgetary situation has been compounded by plans for significant property redevelopment in the Rákosrendező area, which involve substantial financial commitments.
Latorcai noted that the government's initial plan to sell this land to an international investor for remediation work was undercut when the city exercised its right of first refusal, which now places the onus of cleanup costs on the Municipal Government.
In light of Budapest's precarious situation, Mayor Karácsony opted for a confrontation with the government rather than crafting a realistic budget, having previously orchestrated a brief shutdown of city transport services as a form of protest against government budget cuts.
On a broader financial note, the Hungarian government has updated its budget projections, expecting a budget deficit of 4.1% for the current year, an increase from the previously anticipated figure of 3.7%.
The government projects a decrease in the public debt-to-GDP ratio from 73.1% this year to 72.3% by 2025, with expectations of achieving a balanced primary budget by 2024. Recent consultations indicated that budgetary adjustments may be needed due to higher-than-expected operational costs and reduced tax revenue from anticipated GDP growth.
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