HUNGARY - Hungary will cancel about 1.5trn forint ($7.5bn) of bonds after taking over the assets of privately managed pension funds to "immediately" cut indebtedness, according to the Debt Management Agency.
The agency known as AKK will receive the assets from mandatory pension funds from May, said Laszlo Buzas, its deputy chief executive officer. By cancelling the bonds, the government will reduce Hungary's debt by 5.5 percentage points from the current level of about 80% of gross domestic product, Buzas said in an interview from his office in Budapest today.
"The government has a very strong commitment to meet fiscal targets," Buzas said.
Hungary, the most indebted eastern European Union member, is ranked one step above junk by Moody's Investors Service, Standard & Poor's and Fitch Ratings. All three have a negative outlook for Hungary.
"We had some communications from Fitch which said that probably they wouldn't touch Hungary's ratings this year," Buzas said. A representative "doesn't think Moody's will change the ratings to a negative direction this year," Buzas said, adding that he hadn't had communication from Standard & Poor's.
Edward Parker, Fitch's head of emerging Europe sovereign ratings, wasn't immediately available to comment.
"The negative outlook speaks to the medium term," Dietmar Hornung, an analyst at Moody's said by phone from Frankfurt today. "There's nothing really imminent but we can move whenever we feel that it's appropriate."
Hungary may sell Eurobonds as soon as the first quarter to help repay debt that's mostly due in the second half of this year, Buzas said, adding that the timing will depend on market conditions. "We're not in a hurry," Buzas said.
The Centre for Social Justice is calling for the state pension age to be raised to 70 by 2028 and to 75 by 2035, a much faster rise than currently planned.
The High Court has blocked the £12bn transfer of Prudential's annuity book to Rothesay Life, citing the insurer's lack of "established reputation" and differing "capital management policies".
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