Cash-strapped Hungary borrows 1 bn euros from China

Cash-strapped Hungary borrows 1 bn euros from China
by AFP Staff Writers
Budapest (AFP) July 25, 2024

Hungary borrowed one billion euros ($1.1 billion) from Chinese banks earlier this year, its debt management agency said on Thursday, as the EU member state faces a difficult financial situation.

The Hungarian government did not announce the deal, which was first reported by the local financial news site Portfolio based on publicly available data.

Budapest took out a three-year, floating-rate loan from Chinese banks on April 19, data on the Hungarian Government Debt Management Agency's website showed.

"The one-billion-euro loan agreement with the China Development Bank, the Export-Import Bank of China and the Hungarian branch of the Bank of China Limited will finance infrastructure and energy development, among other projects," the agency told AFP in a statement.

The borrowing came just eight days after the government announced that it was postponing a significant amount of public investments against a backdrop of sluggish growth and withheld EU funds.

Brussels has frozen around 20 billion euros in EU funds over the Central European country's backsliding on the bloc's standards.

Hungary's deficit now stands at 4.5 percent of GDP, above the bloc's three percent limit.

In June, the European Commission opened the way for an "excessive deficit procedure" against Hungary and six other countries.

Hungary's nationalist Prime Minister Viktor Orban -- whose country took over the rotating presidency of the EU this month --- has been frequently at odds with Brussels over rule-of-law issues.

Meanwhile, he has been championing an "Eastern opening" foreign policy since his return to power in 2010, seeking closer economic ties with China, Russia and other Asian countries.

Chinese President Xi Jinping travelled to Budapest in May on the final leg of a European tour, while Orban visited Beijing this month as part of his self-described "peace mission" over the war in Ukraine.

The Central European country of 9.6 million people has attracted a flood of major Chinese projects since 2022, mostly related to battery and electric vehicle manufacturing.

The Hungarian government has boasted about having around 15 billion euros worth of ongoing projects from the communist-ruled country.

Hungary has previously received a $917 million loan from Beijing for the construction of a high-speed rail project between Budapest and Belgrade, which is behind schedule and is part of Xi's global Belt and Road infrastructure project.

While the government says Hungary is benefiting from its partnership with China, opposition parties have raised concerns over a lack of transparency, and corruption, claiming the projects only enrich "Orban's inner circle".