national debt

In a historic move, Hungary has quietly borrowed €1 billion from three Chinese banks in the spring of 2024.

This unprecedented loan, the largest in the country’s history, was reported by Hungary’s debt management agency and cited by Politico.

The loan was provided by the China Development Bank, the Export-Import Bank of China, and the Hungarian branch of the Bank of China. Hungary utilised the entire loan amount by 19 April and is expected to repay it within three years.

The Hungarian government did not publicly announce the deal. It only came to light following the publication of data by the government debt management agency. This secrecy contrasts with the usual transparency surrounding such significant financial transactions.

The loan agreement is intended to finance investments in Hungary’s infrastructure and energy sectors. It also aims to keep the country’s debt-to-GDP ratio within the stipulated limit of 28.9%. However, specific details about the loan, such as the interest rate and repayment schedule, have not been disclosed by the agency.

This substantial loan emerges against a backdrop of Hungary’s rising national debt, which has surged to a record €140 billion, accounting for 73.5% of its GDP. Additionally, the country is grappling with a budget deficit of 6.7% of GDP. The financial strain has been exacerbated by Hungary’s ongoing conflict with Brussels, which has cut off access to EU funding.

Amid these challenges, Hungary has been strengthening its ties with China. This growing relationship was highlighted by Chinese President Xi Jinping’s visit to Hungary in May, during which several infrastructure agreements were signed. This visit followed the Hungarian Prime Minister Viktor Orbán’s “peace mission” to China, underscoring the deepening bilateral ties.