Hungary proposes closure of Budapest IMF office due to impending loan repayment

BUDAPEST (AFP) - Hungary's central bank governor Gyorgy Matolcsy said on Monday that Hungary will soon repay a 2008 loan from the International Monetary Fund (IMF), and that the organisation should close its Budapest office.

About 2.2. billion euros (S$3.6 billion) remain outstanding from a 20 billion euro that loan Hungary took from the IMF, the European Union and the World Bank in late 2008 after it was frozen out of the bond market at the height of the global financial crisis.

In a letter to IMF managing director Christine Lagarde, posted on the central bank's website, Mr Matolcsy, a loyal ally of Prime Minister Viktor Orban, proposed the closure of the office - opened in 2009 - as Hungary expects to pay back the loan ahead of schedule in 2014.

"Considering that (the repayments are) almost complete, we have come to the conclusion that it is not necessary to maintain the Fund's Resident Representative Office in Budapest," the letter read.

"We appreciate the valuable support of the Fund in times when Hungary was hit by the crisis and the financing of its public debt... became questionable," it continued.

Hungary has had a fractious relationship with the IMF since Mr Orban's right-wing government came to power in 2010.

Long-running talks begun in 2011 between Budapest and the IMF on a second loan - a 15 billion euro credit line - ended early in 2013 after consistent disagreement on issues including the nature of the loan and economic policy.

Last year the government ran an advertising campaign criticising the IMF for "interference" in Hungarian policy-making.

Business website commented that Monday's announcement was a message from the government that it considers its affairs with the IMF as closed.

"This can be used in the government's campaign communication as the elections (due in early 2014) approach," the website said.

The Fund operates offices in 84 countries worldwide, including three of Hungary's neighbours, Serbia, Romania and Ukraine.

In April the IMF closed its office in Latvia after it said the Baltic country had paid back in 2012 a loan taken out in 2008.

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