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Achieving Investment-grade Bonds with MIGA’s Credit Enhancement

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Hungary

Since the global financial crisis began in 2008, lending to Hungarian businesses has declined sharply, mainly as a result of deleveraging and strict credit allocation decisions of foreign banks operating in the country. In fact, funding reductions by foreign banks have accelerated in Hungary beyond the pace seen in peer countries.

At the same time credit demand has remained robust, especially in the export sector, which has remained buoyant despite the weak overall outlook in the Hungarian economy. It is estimated that 85- 90 percent of the country’s GDP has its home in the export sector and the sector is dominated by small and medium enterprises.

In this context, Hungary’s export-import bank, Magyar Export-Import Bank plays a strategic role within the government’s economic plan, as it focuses on Hungary’s export trade—following the sharp drop in domestic consumption and investment—while compensating for the severe decline in credit supply. When the Hungarian government mandated Exim to provide more, affordable financing to Hungarian exporters, Exim was hard-pressed to deliver on a tough mandate in difficult market condition.