Hungarian Central Banker Tears Into Orban’s Economic Policy

(Bloomberg) -- Hungary’s central bank Governor Gyorgy Matolcsy on Thursday presented a litany of criticisms of Prime Minister Viktor Orban’s budget policies, laying bare a deepening conflict with the government over the country’s economic management.

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Speaking at a conference in eastern Hungary, Matolcsy assailed the cabinet for veering off the path of sustainable fiscal deficits. He also accused the government of adding to inflation pressures since 2021 and causing a jump in debt servicing costs.

The governor’s mandate will end in March 2025, and - following his repeated clashes with Orban’s administration - he isn’t expected to be nominated for a third six-year term. The back-and-forth between the policymakers has often weighed on the forint, which has been the worst performing currency among central Europe’s peers this year.

“It’s not a pleasant task for the central bank and its governor to keep having to formulate criticism,” Matolcsy said in one of his most scathing remarks about the cabinet. “In our view the government’s policies are very mistaken, because they amount to pro-inflationary steps.”

The governor rejected an accusation by Economy Minister Marton Nagy, his former deputy, that the bank is single-mindedly focused on price growth, with a retort that it’s the institution’s legal obligation to do so. That debate followed other clashes, partly on the bank’s governance and the handling of its funds.

To manage the increased sovereign debt load — which was listed as one of the key risks by Matolcsy — the government has sought new funding sources including loans from China. Hungary also raised ¥39.6 billion ($276 million) in a Samurai bond sale this week as part of its diversification plan.

(Updates with markets in the third paragraph, more comments starting in fourth.)

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