Hungary's currency strengthened Monday after the International Monetary Fund said the country is close to receiving a financial bailout package for its troubled economy. Hungarian markets had been closed since Thursday for a national holiday, a day after the National Bank of Hungary raised its key interest rate by 3 percentage points, to an annual 11.5 percent from 8.5 percent in an effort to support the forint. The forint lost 30 to 40 percent of its value against the euro and the US dollar in the past weeks as the global financial crisis reached Hungary, making investors look to safer waters. By midday Monday, the forint was up, with a euro worth 271 forints. The euro had been as high as around 285 forints late last week. In July, the euro was worth as little as 229 forints. At the same time, shares on the Budapest Stock Exchange were in a nosedive. Trading in blue chips like OTP Bank and oil company MOL were temporarily suspended due to the large losses while the market's benchmark BUX index was down 8.1 percent at midday. The IMF said late Sunday that it had reached a “broad agreement” with Hungarian authorities about policies to bolster the near-term stability of Hungary's economy and improve its long-term growth potential. “A substantial financing package in support of these strong policies will be announced when the program is finalized in the next few days,” IMF Managing Director Dominique Strauss-Kahn said in statement, adding that the European Union, individual European governments and other institutions also were part of the deal. The IMF's standby deal would allow the country to draw funds under prearranged conditions and would serve to calm investors and dispel fears about Hungary defaulting on its loans. According to analysts at the Portfolio.hu web site, Hungary needs to pay back some 24 billion euros ($30 billion) of external and domestic debt in the next year.
