Hungary secures CAD 1,5B loan from China for urgent infrastructure needs
Hungary secured a loan from Chinese banks in April amounting to CAD 1,5 billion for infrastructure purposes, the Hungarian economic portal Portfolio reported on Thursday. Excluding bonds, this represents the highest amount of unpaid debt of the Hungarian government, the portal adds.
Portfolio reports, citing data published by the Public Debt Management Center (AKK), that the loan was taken on April 19th from China Development Bank, China Exim Bank, and Bank of China and is to be repaid within three years.
The interest rate and repayment schedule of the loan are unknown. The Hungarian state took it "to finance central budget expenses in the areas of advanced technology, infrastructure construction, transport infrastructure, and energy."
"The amount taken in April will significantly increase Hungary's foreign currency debt," notes Portfolio. Currently, the foreign currency debt ratio to total debt is 28.9 percent.
The government urgently needs money
The portal emphasizes that Viktor Orban's government urgently needs the money due to the poor budget situation, to finance the takeover of Budapest airport in early June, a CAD 300 million fine in connection with a European Court of Justice ruling, and a still-frozen large portion of EU funds. Previously, the Hungarian government suggested that it might seek financing from the East in place of EU funds.
During Chinese leader Xi Jinping's visit to Hungary in early May, the two countries signed nearly 20 bilateral agreements, the most important of which concerned infrastructure projects. Among the joint projects was the construction of a high-speed rail connecting Budapest airport with the city centre and the V0 rail line, which will allow freight transport to bypass the Hungarian capital.
In mid-July, Hungary's Minister of Economic Development Marton Nagy announced plans to develop infrastructure connecting Budapest city centre with the airport. Nagy said at the time that no decision had yet been made on whether China would finance this investment.
Hungary is currently the only EU country participating in the Chinese Belt and Road Initiative (BRI) and has the best relations with Beijing among all EU countries.
China is investing billions of euros in Hungary's electric car sector and expects Budapest to influence other EU countries regarding policies towards China.
