Hungary launches $157 million scheme to curb heating costs ahead of election

BUDAPEST, Jan 29 - Hungary's government will partly reimburse higher heating costs for households in January due to increased demand amid freezing temperatures at a cost of 50 billion forints ($157.14 million), adding to large-scale spending ahead of an April election.

In power since 2010, Prime Minister Viktor Orban is seeking to revive the economy ahead of the April 12 ballot, with his right-wing Fidesz trailing centre-right opposition challenger Tisza based on most fresh surveys.

A Eurobarometer survey published in December showed the rising cost of living topped domestic concerns - despite inflation retreating from highs above 25% in early 2023 to the central bank's 2% to 4% tolerance band by the end of 2025.

"With this decision, we wish to help all Hungarian families who receive energy through some kind of pipeline," Energy Minister Csaba Lantos told a news conference on Thursday.

Hungary covers most of its energy needs from Russian imports and has maintained its reliance on Russian energy during the war in Ukraine, prompting criticism from several European Union and NATO allies.

The government will give a 30% discount to household consumers, Orban's chief of staff, Gergely Gulyas said, adding the measure would be financed partly from government funds and a tax on energy suppliers.

The measure involves tweaks to a system of energy price subsidies, which cost 1% worth of economic output in 2024 and 0.5% of output last year based on European Commission estimates. The EU has recommended that Hungary should wind down the scheme.

Capital Economics analysts say Orban's spending moves, which have contributed to Fitch Ratings cutting its outlook on Hungary's debt to negative last year, reflect growing pressure on public finances ahead of the ballot.

"Our forecast for the government's budget deficit to widen to 5.5% of GDP this year could prove to be too optimistic," Capital Economics analyst Nicholas Farr said. REUTERS