The economic policy pursued over the past decade has helped to achieve and maintain macroeconomic balance in Hungary and reduced the country’s external and internal vulnerability, thereby significantly decreasing its foreign currency exposure. As a result, the coronavirus pandemic has hit the Hungarian economy with stable fundamentals and strong growth.
The pandemic has led to a great degree of uncertainty in the global economy, significantly increasing volatility in particular sub-markets. The MNB is ready to provide any support possible to restore economic growth and to preserve financial stability of the Hungarian economy.
The Magyar Nemzeti Bank’s international reserves amounted to EUR 30,2 billion at the end of June. This level of reserves significantly exceeds all relevant benchmarks. In addition, in recent months the Bank has created an international safety net consisting of bilateral swap and repo agreements, which enables it to increase foreign currency liquidity with an amount of up to EUR 10 billion within a short time. The components of the safety net are the following:
- a repo agreement concluded with the European Central Bank, through which the MNB can provide euro liquidity of up to EUR 4 billion to Hungarian financial institutions,
- an FX swap agreement concluded with the People’s Bank of China in 2013, which ensures liquidity of some EUR 2.5 billion,
- a repo agreement concluded with the Bank for International Settlements, making available EUR 2 billion liquidity,
- the repo facility announced by the Federal Reserve, which can provide USD 1-2 billion of liquidity for the MNB.
The safety net created by the above agreements, ensures additional foreign currency liquidity over central bank reserves. By building the safety net, the Bank has significantly increased its room for manoeuvre, thereby it is able to give a quick and firm response to potential tension emerging in any sub-market while maintaining safe levels of international reserves.