Hungary downgraded to junk by third ratings agency

Hungary’s credit rating has been cut to junk status by a third ratings agency, as efforts between the government in Budapest and the European Union and International Monetary Fund to end a dispute over a new loan facility continue, Reuters has reported.

Fitch Ratings blamed “unorthodox policies which are undermining investor confidence and complicating the agreement of a new IMF/EU deal” for its decision to downgrade Hungary’s rating from BBB- to BB+.

The move – which Prime Minister Viktor Orban’s centre-right government said was “surprising” – follows similar downgrades by the agencies Moody’s and Standard & Poor’s, who both cut the country’s credit rating to junk in recent weeks, according to the BBC.

Preliminary negotiations with the EU and IMF over emergency financial aid for Hungary, requested by Budapest late last year, broke down over concerns that the government is attempting to undermine the independence of Hungary’s central bank, although the country’s bonds and the forint rallied earlier today after Orban pledged to cooperate with National Bank of Hungary President Andras Simor, Bloomberg reported.

The prime minister met with Simor this morning, according to the Associated Press. Orban dismissed market speculation that his government intended to support the state budget through central bank reserves and pledged to support the bank’s efforts to stabilize Hungary’s economy.

The hefty amount of foreign-currency mortgages taken out by Hungarian home-buyers in recent years represents a major challenge for the country, according to the BBC. A declining forint means debtors cannot afford to make their repayments.