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Monday, 18 June, 2001, 16:37 GMT 17:37 UK
Hungary lifts last currency restrictions
Hungarian capital Budapest
Forints are now freely traded in Budapest
In a significant step towards its ambition of joining the European Union and adopting the euro, Hungary has made its currency, the forint, fully convertible.

For the first time in 70 years, Hungarians are now entitled to open bank accounts abroad, and foreigners are allowed free access to all forint-denominated stocks and bonds.

The move could also be a shot in the arm for the Hungarian tourist business, allowing visitors for the first time to take forints out of the country when they leave and convert them at their next destination.

Hungary is only the second ex-communist country, after the Czech Republic, to achieve full currency convertibility.

Liberals

Forint liberalisation has been a long-held ambition of the Hungarian government, which is eager to meet the criteria for adopting the euro even before it joins the EU - something currently likely to happen in 2004 at the earliest.

The move has cheered the financial community, which has long rated Hungary as one of the most liberal and well-managed economies in Eastern Europe.

Investment bank Credit Suisse First Boston recommended forint assets to investors on the strength of the currency liberalisation, and the central bank's willingness to get tough on inflation.

The central bank launched an inflation-targeting monetary policy in early June, projecting 7% year-on-year inflation for the end of 2001 and 4.5% by end-2002.

Symbolic value

Liberalisation will also prove popular among Hungarians, for whom the right to travel freely and hold foreign currency has a strong symbolic value.

Like other East Europeans, Hungarians were forbidden to own hard currency for most of the communist period, and restrictions on holding foreign currencies were only abolished in 1996.

Hungarians intent on travel will also be cheered that the forint is trading at its highest level in 18 months, buoyed at least partly by the liberalisation.

The forint has appreciated by 4% against the dollar and the euro since the beginning of June, and is currently trading at about 246 forints to the euro.

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16 Jun 01 | Europe
EU sets date for expansion
12 Jun 01 | Europe
Hungary breakthrough in EU talks
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