An International Monetary Fund (IMF) delegation visited Hungary during the last week of September and the first week of October to hold consultations with Hungarian authorities. At the conclusion of the visit, the IMF issued a detailed statement, the contents of which were reported by Világgazdaság.
One of FIDESZ’ main electoral promises before the 2010 elections was “sending the IMF” packing, as they put it. After their historic win, the Orbán government has managed to repay their multi billion euro loan early in August 2013. In Viktor Orbán’s own interpretation, the crippling austerity measures that the IMF has imposed on the Hungarian population was not only a social issue, it was a matter of national sovereignty.
After the April elections, it did not take long for the IMF to return to Hungary with the advent of a new, pro-EU government. Even though Brussels has promised the release of billions of European funds to the Magyar government for the alleged progress they made in restoring the rule-of-law in Hungary, there have been reports of a bridging loan from the IMF to fill the gap until the money from Brussels arrives.
In a statement, IMF experts who have visited Hungary in September and October have noted that the economy is being held back by several factors simultaneously: weak investment appetite, a widening gap between wages and productivity, a challenging global environment, and an aging population.
Meanwhile, despite pre-election promises to the opposite, this year’s budget deficit is projected to range between 7% and 7.5% of GDP, and public debt is on the rise.
Given these challenges, the IMF is urging the implementation of a reform package. The Fund has put forward several proposals for a potential TISZA government.
Péter Magyar casting his ballot during the election after campaigning on cheaper energy prices, stronger social net, better pensions. Photo: MTI/Hegedüs Róbert
1. Multi-rate personal income tax and corporate tax hike
According to the international organization, the Hungarian tax system is the least progressive in the OECD and generates less tax revenue than necessary, while the flat personal income tax and corporate tax rates are among the lowest in the region. The IMF suggests that a multi-rate tax system and the restructuring of tax allowances would boost both revenue and labor market activity. Additionally, raising the corporate tax rate was proposed, as was the idea that sector-specific special taxes could eventually be phased out.
2. Fewer VAT exemptions and tax allowances
The Fund advocates for narrowing certain exemptions and preferential rates while urging support for households in need. This concept is familiar: it is known as the means-testing principle.
3. Phasing out utility cost reductions
Scaling back subsidized energy consumption thresholds—essentially the utility cost reduction scheme—is also on the list. As noted, phasing out “distorted” price caps and energy subsidies will be challenging, but it is a necessary step.
4. Phasing out the “Home-start” program
According to the IMF, remaining loan subsidy programs for first-time property buyers should be phased out, as they distort credit allocation and undermine the effectiveness of monetary policy.
5. Raising the retirement age
With pension and healthcare expenditures projected to rise by nearly 4 percentage points of GDP by 2050, the Fund proposes linking the retirement age to life expectancy—which effectively means raising the retirement age. Additionally, the IMF advocates for the gradual elimination of early retirement options and a recalculation of pension benefits.
Pensioners. Photo: Pixabay
6. Privatization?
Finally, the report alluded to the potential sale of state-owned enterprises that the Orbán governments had previously repurchased from foreign owners. It noted that state-owned companies tend to be consistently less profitable and less productive than private firms operating in the same sectors. Furthermore, a significant state presence crowds out private enterprises and can weaken the performance of private-sector competitors.
Regarding the Monetary Fund’s recommendations, we should also cite the latest country report from the Organisation for Economic Co-operation and Development (OECD). The document proposes reforming the pension system and raising the retirement age; furthermore, it suggests—among other measures—making personal income tax more progressive, reviewing tax allowances, and, not least, phasing out the utility price reduction scheme.
In other words, should the TISZA government take the IMF’s guidance as is widely expected to happen, it will effectively phase out all the measures of the previous Orbán government that were meant to return national assets into the hands of the state or to Hungarian enterprise, end energy price caps that have made household energy and heating bills the lowest in the EU, shut down favorable loans for first-time property buyers, and implement austerity measures that have impoverished millions of Hungarian citizens during the previous socialist governments of Ferenc Gyurcsány and Gordon Bajnai (2004-2010). Should the Magyar government take the IMF’s advise, raising the pensions age would also introduce a deeply unpopular measure that has not been hinted at by the winners during the 2026 election campaign.
Via Világgazdaság; Featured Image: Hungary Today
The post Back to Reality: IMF Sends Hungary a Crippling Austerity Wish-list appeared first on Hungary Today.
Back to Reality: IMF Sends Hungary a Crippling Austerity Wish-list 2026
IUSTITIA.BG – Investigations 2009-2026 2026-10-09 08:11:02
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