(Bloomberg) -- Hungary said it took a €1 billion ($1.1 billion) loan in April from China, adding that such financing is likely to become more widespread in the future as economic links with the Asian nation grow.
The government received a 3-year loan from China Development Bank, Export-Import Bank of China and Bank of China Ltd.’s Hungarian unit, the Debt Management Agency said Thursday. Gergely Gulyas, the minister in charge of the prime minister’s office, declined to explain Friday why the deal hadn’t been formally announced until this week, in response to repeated questions from reporters.
“One billion euros may seem like a large amount but it can’t be regarded as exceptional” in the context of public finances, Gulyas said. Hungary will continue to pursue similar loan deals to diversify its sources, he said.
The fresh loan will help finance infrastructure, transport and energy projects, according to the debt agency. Hungary earlier took a $917 million loan in 2022 from Export-Import Bank of China to finance the Belgrade-Budapest rail project, part of China’s Belt and Road Initiative, data from the debt agency shows.
The latest loan came just before Chinese President Xi Jinping visited Budapest in May to sign deals with Hungarian Prime Minister Viktor Orban on new rail and energy projects. These will total between €5 billion and €10 billion, typically financed by loans, Economy Minister Marton Nagy said at the time. A planned rail corridor around Budapest to link up new Chinese vehicle and battery plants in Hungary to western Europe will alone amount to several billion euros, Nagy said during Xi’s visit.
Chinese Goods
“Chinese companies need help to transport their goods,” Nagy said in an interview with Inforadio late Thursday. “When the Hungarian state makes infrastructural improvements, it can expect Chinese financing as it will be Chinese goods that travel on the rail and motorways.”
Besides the deepening economic links to China, Orban has upset western allies by intensifying diplomatic ties with Xi and Russian President Vladimir Putin on a self-styled “peace mission” this month.
The premier has also embarked on costly projects such as the acquisition of Budapest Airport, at a time when large parts of Hungary’s European Union funding remain suspended. In addition to the new Chinese loans, Hungary has continued to rely on the sale of international dollar and euro bonds as well as domestic retail debt to finance its widening budget deficit.
Gross domestic product data to be published next week will show that struggling industrial exports to western Europe are still holding back the economy, Nagy said in the Inforadio interview. GDP growth may reach 2.2% or 2.3% this year, Nagy said.
--With assistance from Veronika Gulyas.
(Updates with fresh comment from a senior minister.)
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