Page last updated at 03:35 GMT, Wednesday, 29 October 2008

Hungary to get $25bn rescue deal

Man cycling over Megyeri Bridge
The package is dependant on Hungary reining in public spending

Hungary has been granted a multi-billion dollar rescue package by the IMF, the EU and the World Bank.

The deal, worth $25bn (15.6bn), is intended to help Hungary cope with the ongoing effects of the global financial crisis.

It follows similar measures taken by the IMF to prop up the economies of Ukraine and Iceland.

The fund is also in talks with Pakistan and Belarus about loans to help them through the crisis.

The package, which includes $16bn from the IMF, a further $8bn from the EU and $1bn from the World Bank, far exceeds the $16.5bn (10.4bn) loan offered to Ukraine on Sunday.

IMF Managing Director Dominique Strauss-Kahn said it was "designed to restore investor confidence and alleviate the stress experienced in recent weeks in the Hungarian financial markets".

Mr Strauss-Kahn said the package included measures to maintain "adequate domestic and foreign currency liquidity, as well as strong levels of capital, for the banking system".

"These strong policies justify the exceptional level of access to Fund resources - equivalent to around 1,020% of Hungary's quota in the IMF - and deserve the support of the international community," he said.

Foreign debt

The BBC's Central Europe correspondent, Nick Thorpe, says Hungary, like other emerging markets, has been badly hit by what has been called the second wave of the financial crisis - the severe shortage of foreign currency.

The Hungarian forint has lost almost 20% of its value in the past month against the euro and the dollar.

The country has already borrowed more than $100bn from abroad.

The European Commission said the rescue package depended on Hungary making a strong commitment to intensify efforts to cut its current account deficit.

Meanwhile, the World Bank has said it will support the implementation of reforms in areas such as the financial sector and fiscal management.

"These measures would support the country's longer-term stabilisation and economic restructuring," said Orsalia Kalantzopoulos, World Bank director for Central Europe and Baltic countries.

Last week, Hungary's central bank raised interest rates by three percentage points to counter a sharp fall in the value of the forint, but the effects were not expected to be long-lasting.

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