November 17, 2011 / 6:22 PM / 8 years ago

UPDATE 3-Hungary says seeks new IMF deal, Fund says no requests yet

* New agreement would not add to debt, would be “insurance” -ministry

* Foreign Minister: seeking precautionary agreement with IMF

* IMF says has not received request to negotiate new programme

* New deal could help Hungary avoid downgrade -analysts

* Cbank says unaware of govt’s intention to re-engage with IMF

* Going back to IMF seen as major political defeat for PM Orban

* Forint surges 2 pct vs euro, stocks jumps, CDS falls on IMF news

By Krisztina Than and Gergely Szakacs

BUDAPEST, Nov 17 (Reuters) - Under mounting pressure from markets, Hungary said on Thursday it would start talks with the International Monetary Fund on a new precautionary deal, marking a major U-turn by the government, but the Fund said it had not received any requests for a new loan programme.

The Economy Ministry said it would begin talks with the Fund about a “new type of cooperation” that will not increase debt, but would work as an “insurance” and would help Hungary retain access to market funding amid turmoil in the euro zone.

Foreign Minister Janos Martonyi told Inforadio later that Hungary wanted to conclude a precautionary agreement with the IMF, which would work as a safety net.

The IMF, which has a delegation in Hungary now on a regular economic review, said it had not been asked by Hungarian authorities to negotiate a new programme.

The centre-right government, which broke ties with the IMF last year and has since stunned investors with a series of unconventional fiscal measures, has so far rejected the idea of going back to the Fund to secure a financing backstop amid the euro zone debt crisis, which has also hit Hungary’s markets.

But the forint has slumped to all-time lows versus the euro this week and two rating agencies have warned Hungary could lose its investment grade credit rating due to its weak growth outlook and unpredictable policies.

While securing a new financial safety net from the IMF could shore up Hungary’s markets, the move would be seen as a major domestic political defeat for Prime Minister Viktor Orban, who had earlier told voters that under IMF scrutiny Hungary would lose its “economic sovereignty”.

Hungary was rescued from collapse with a 20 billion euro IMF/EU loan in 2008. That loan expired last year.

The forint surged 2 percent against the euro after the government’s announcement.

“A new type of cooperation with the IMF, adapted to our economy which has been transformed on the basis of our national interests, could be a potent instrument which would increase our financial and economic independence instead of hindering it like the old one,” the Economy Ministry said in a statement.

“This new type of cooperation, unlike the old one, would not increase government debt as we do not take out a credit, but we will make an insurance contract in order to increase the safety of investors in Hungary.”

The ministry did not specify what kind of agreement it sought with the IMF. For possible options, see

The central bank (NBH) said it was not aware of the government’s intent to re-engage with the IMF, and stressed that the NBH should also be involved in the talks.

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