Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

HUNGARY

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of June 30, 2007)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: January 1, 1996.
Exchange Measures
Restrictions and/or multiple currency practicesNo restrictions as reported in the latest staff report as of December 31, 2006.
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)On July 13, 2006, Hungary notified the IMF of restrictions imposed for security reasons against (1) certain persons acting in violation of the arms embargo with respect to the Democratic Republic of the Congo, (2) certain persons impeding the peace process and breaking international law in the Darfur region of Sudan, (3) certain persons suspected of involvement in the assassination of former Lebanese Prime Minister Rafik Hariri, and (4) President Lukashenko and certain officials of Belarus. These measures were taken in accordance with European Council regulations. Until November 15, 2006, Hungary maintained payments restrictions against Libya under Government Decree No. 164/1993.
Other security restrictionsCertain exchange restrictions are in place due to the direct effect and applicability of the relevant EU regulations. The freezing of funds and economic resources apply with respect to (1) former Yugoslav president Slobodan Milosevic and certain other natural persons; (2) certain persons, groups, and entities, with a view to combating terrorism; (3) persons and entities associated with Osama bin Laden, the Taliban, and Al-Qaida, or with Liberia’s former president Charles Taylor; (4) Iraq, Myanmar, and Zimbabwe; (5) certain persons indicted by the International Criminal Tribunal for the Former Yugoslavia; (6) certain persons who constitute a threat to the peace and national reconciliation process in Côte d’Ivoire; and (7) the Democratic Republic of the Congo, Lebanon, Sudan, and the Syrian Arab Republic. European Council Regulation No. 3275/93 concerning Libya on the prohibition of satisfying claims with regard to contracts and transactions whose performance was affected by UN Security Council Resolution No. 883(1993) and related resolutions are still in force.
References to legal instruments and hyperlinksAll of the restrictive measures imposed by the EC are directly in effect and applicable in Hungary: http://ec.europa.eu/comm/external_relations/cfsp/sanctions/measures.htm; http://europa.eu./comm/external_relations/cfsp/sanctions/index.htm; Government Decree No. 164/1993.
Exchange Arrangement
CurrencyThe currency of Hungary is the Hungarian forint.
Exchange rate structureUnitary.
Classification
Pegged exchange rate within horizontal bandsThe Hungarian forint trades against the euro within a band of ±15% around the central parity, which is fixed to the euro at Ft 282.36 per ⊬1.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketAll banks may engage in forward transactions at exchange rates that are negotiated freely between the banks and their customers.
References to legal instruments and hyperlinksn.a.
Arrangements for Payments and Receipts
Prescription of currency requirementsNo.
Payments arrangements
Regional arrangementsHungary is a member of the EU.
Administration of controlNo.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)No.
Controls on exports and imports of banknotesImports and exports of more than Ft 1 million or its equivalent in foreign currency must be declared to customs authorities when crossing the border. In accordance with Article 3 of Regulation No. 1889/2005/EC of the European Parliament and of the Council of the European Parliament and of the Council on Controls of Cash Entering or Leaving the Community, effective June 15, 2007, any natural person entering or leaving the European Community and carrying cash of a value of ⊬10,000 or more must declare it to the relevant authorities of the member state through which the person is entering or leaving the Community. The obligation to declare will not have been fulfilled if the information provided is incorrect or incomplete.
On exportsYes.
On importsYes.
References to legal instruments and hyperlinksArticle 3 of Regulation No. 1889/2005/EC of the European Parliament and of the Council of the European Parliament and of the Council on Controls of Cash Entering or Leaving the Community; http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2005:309:0009:01:EN:HTML.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadControls apply to deposits of funds (1) with nonresident financial institutions by an insurance company if such assets are to form part of its mathematical reserves and (2) in a current account with nonresident financial institutions by an insurance company if such assets are to form part of its security capital and technical reserves.
Accounts in domestic currency held abroadControls apply to deposits of funds (1) with nonresident financial institutions by an insurance company if such assets are to form part of its mathematical reserves and (2) in a current account with nonresident financial institutions by an insurance company if such assets are to form part of its security capital and technical reserves.
Accounts in domestic currency convertible into foreign currencyYes.
References to legal instruments and hyperlinksn.a.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsNo.
References to legal instruments and hyperlinksn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measuresAbout 95% of Hungarian imports are liberalized. Licenses are required for a number of products, as well as for imports destined for the settlement of outstanding balances of debts.
Negative listIn accordance with EU regulations, no import licenses are required, except for certain products that are subject to quantitative restrictions, safeguard measures, or import surveillance. For agricultural products, the import licensing system is automatic and used only for statistical purposes. Imports of certain products (e.g., explosives and firearms, ammunition, dual-use goods, and certain drugs) are subject to licensing.
Licenses with quotasIn accordance with EU regulations, licenses are required with respect to a number of tariff quotas in the agricultural sector. In addition, licenses are required for certain imports subject to quantitative restrictions.
Other nontariff measuresYes.
Import taxes and/or tariffsGoods for personal use brought in by returning Hungarian travelers are subject to import duties in accordance with the EU Common Customs Tariff (CCT) based on the actual invoice price with a duty-free allowance of an amount equivalent to ⊬175. For tobacco products, alcoholic beverages, perfumes, and medicinal products, quantitative limits apply. Goods imported into Hungary are subject to customs duties in accordance with the CCT.
State import monopolyNo.
References to legal instruments and hyperlinkswww.mkeh.gov.hu/jogszabalyok.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsNo.
Export licenses
Without quotasExports of certain products (mainly military and dual-use goods) require a license.
Export taxesNo.
References to legal instruments and hyperlinkswww.mkeh.gov.hu/jogszabalyok.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
References to legal instruments and hyperlinksn.a.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsYes.
Repatriation requirementsNo.
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsControls may apply to the purchase of shares or other securities of a participating nature that may be affected by regulations on inward direct investment and establishment in air transport and in companies licensed to operate in international waters.
Purchase abroad by residentsControls apply to the purchase of securities issued by nonresidents if such assets are to form cover for the technical provisions of an insurance company, unless the assets (1) were issued by (a) an OECD or EEA member state, (b) local or regional authorities of OECD or EEA member states, (c) economic operators established in an OECD or EEA member state, or (d) an international organization of which one or more OECD or EEA member states are members; and (2) are kept in the territory of OECD or EEA member states. Pension funds may purchase securities issued by nonresidents not exceeding 30% of their total investment portfolio.
Bonds or other debt securities
Purchase abroad by residentsControls apply to the purchase of securities issued by nonresidents if such assets are to form cover for the technical provisions of an insurance company, unless the assets (1) were issued by (a) an OECD or EEA member state, (b) local or regional authorities of OECD or EEA member states, (c) economic operators established in an OECD or EEA member state, or (d) an international organization of which one or more OECD or EEA member states are members; and (2) are kept in the territory of OECD or EEA member states. Pension funds may purchase securities issued by nonresidents not exceeding 30% of their total investment portfolio.
On money market instruments
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsControls apply to the purchase of securities issued by nonresidents if such assets are to form cover for the technical provisions of an insurance company, unless the assets (1) were issued by (a) an OECD or EEA member state, (b) local or regional authorities of OECD or EEA member states, (c) economic operators established in an OECD or EEA member state, or (d) an international organization of which one or more OECD or EEA member states are members; and (2) are kept in the territory of OECD or EEA member states. Pension funds may purchase securities issued by nonresidents not exceeding 30% of their total investment portfolio.
On collective investment securities
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsControls apply to the purchase of securities issued by nonresidents if such assets are to form cover for the technical provisions of an insurance company, unless the assets (1) were issued by (a) an OECD or EEA member state, (b) local or regional authorities of OECD or EEA member states, (c) economic operators established in an OECD or EEA member state, or (d) an international organization of which one or more OECD or EEA member states are members; and (2) are kept in the territory of OECD or EEA member states. Pension funds may purchase securities issued by nonresidents not exceeding 30% of their total investment portfolio.
Controls on derivatives and other instrumentsNo.
Controls on credit operations
Financial credits
By residents to nonresidentsControls apply to credits and loans granted to nonresidents in the case of a mortgage loan based on real estate collateral situated outside Hungary and if it is to form part of the security capital of an insurance company.
Controls on direct investment
Inward direct investmentControls apply to investments in air or water transportation to the extent that the majority of licenses for domestic air transport and shipping licenses to operate in international waters are reserved for Hungarian-owned or–controlled companies. In addition, branches of nonresident investors are not allowed to provide asset management services to domestic compulsory private pension funds.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase abroad by residentsReal estate investments by insurance companies must be localized in EEA or OECD countries. Mandatory and voluntary pension funds may invest only in real estate localized in the EEA.
Purchase locally by nonresidentsYes.
Controls on personal capital transactionsNo.
References to legal instruments and hyperlinksn.a.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutions
Borrowing abroadFinancial institutions must report monthly all foreign borrowing to the Magyar Nemzeti Bank (MNB), the central bank of Hungary, for statistical purposes.
Lending to nonresidents (financial or commercial credits)Lending is allowed according to the following rules: (1) a bank may not have aggregate lending with an individual borrower of more than 25% of its adjusted capital; and (2) country risk rules prescribe the placement of specific reserves against possible losses on credits extended to problem countries, the list of which is based on the assessment of the MNB and published by the MOF.
Medium- and long-term lending to nonresidents from OECD member countries may be effected freely.
Differential treatment of deposit accounts held by nonresidents
Reserve requirementsNonresident liabilities with a maturity of less than two years (denominated in either forint or foreign currency) are subject to the same 5% reserve requirement as resident liabilities with a maturity of less than two years. Both resident and nonresident liabilities with maturities of more than two years are exempt from reserve requirements.
Provisions specific to institutional investors
Insurance companies
Limits (max.) on securities issued by nonresidentsControls apply to the purchase of securities issued by nonresidents if such assets are to form cover for the technical provisions of an insurance company, unless the assets (1) were issued by (a) an OECD or EEA member state, (b) local or regional authorities of OECD or EEA member states, (c) economic operators established in an OECD or EEA member state, or (d) an international organization of which one or more OECD or EEA member states are members; and (2) are kept in the territory of OECD or EEA member states. Pension funds may purchase securities issued by nonresidents not exceeding 30% of their total investment portfolio.
Limits (max.) on investment portfolio held abroadControls apply to (1) credits and loans granted to nonresidents in the case of a mortgage loan based on real estate collateral situated outside Hungary and if it is to form part of the security capital of an insurance company; (2) real estate investments by insurance companies unless the real estate is located in EEA or OECD countries; and (3) foreign assets constituting cover for the technical provisions of an insurance company unless the assets are kept in OECD or EEA member states.
Currency-matching regulations on assets/liabilities compositionInsurance companies are subject to these regulations.
Pension funds
Limits (max.) on securities issued by nonresidentsPension funds may acquire securities issued by nonresidents not exceeding 30% of their investment portfolio.
Limits (max.) on investment portfolio held abroadPension funds may invest only in real estate located in EEA countries. Controls apply on foreign assets of pension funds exceeding 30% of their total investment portfolio.
Limits (min.) on investment portfolio held locallyn.a.
Currency-matching regulations on assets/liabilities compositionn.a.
Investment firms and collective investment fundsn.a.
References to legal instruments and hyperlinksMNB Decree No. 10/2005 (VI. 11.) on the Calculation, the Method of Allocation and Placement of the Minimum Reserves; http://english.mnb.hu/engine.aspx?page=mnben_kotelezotartalekrendszer; Act LX of 2003 on Insurance Institutions and the Insurance Business; Government Decrees 281/2001 and 282/2001 on the Investment and Management of Pension Funds.
Changes during 2006
Exchange measuresJuly 13. Hungary notified the IMF of restrictions imposed for security reasons against (1) certain persons acting in violation of the arms embargo with respect to the Democratic Republic of the Congo, (2) certain persons impeding the peace process and breaking international law in the Darfur region of Sudan, (3) certain persons suspected of involvement in the assassination of former Lebanese Prime Minister Rafik Hariri, and (4) President Lukashenko and certain officials of Belarus.
November 15. Payments restrictions against Libya based on Government Decree No. 164/1993 were eliminated.
Changes during 2007
Arrangements for payments and receiptsJune 15. Natural persons entering or leaving the Community and carrying cash of a value of ⊬10,000 or more must declare it to the relevant authorities of the member state through which the person is entering or leaving the Community.

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