BUDAPEST—Hungary accelerated efforts Friday to aid local borrowers squeezed by the sharp rise in the value of the Swiss franc in recent years, even as authorities in Bern sought to check further gains by the safe-haven Alpine currency amid this week's global market turmoil.
Starting next month, Hungarians with foreign-currency loans will be able to participate in a repayment program that for three years will fix the exchange rate applied to their outstanding debts at a level far below the prevailing market rates for the Swiss franc and the euro.
The appreciation of the Swiss franc has placed enormous financial pressure on households across Hungary, Poland and Croatia that took out Swiss-franc loans in the middle of the last decade because they had far lower interest rates than loans in their domestic currencies.
These debt woes have acted as a brake on national economic growth, dragging on consumer confidence and spending, and pushing governments to act. Poland this week also enacted legislation aimed at easing pressure on foreign-currency borrowers.
"If this continues, the hit to consumption could be quite high" in Hungary and Poland, said Neil Shearing, senior emerging-markets economist at Capital Economics in London. "The only real way out of this is for the Swiss franc to depreciate, and we don't see that happening soon."
Hungary's plan, which offers more help to borrowers than the measure adopted by Warsaw, could help cushion some of the blow here in the short term, Mr. Shearing said. But even Budapest's moves are effectively just pushing households' debt problems further down the road.
Borrowers who participate can make monthly loan payments at a rate of 180 Hungarian forints for 1 Swiss franc, or 250 forints for 1 euro. The franc was trading at about 248 forints on Friday, while the euro was trading at around 272 forints.
The difference between what is paid at the fixed rate and what is owed at the actual rate will be turned into a separate forint-denominated loan that must be repaid, with interest, starting 36 months after a borrower enters the program.
Authorities said Friday that borrowers would be able to start paying lower installments from September, one month earlier than originally planned when the program was approved in May. Borrowers whose loans are less than 90 days overdue are eligible to participate. They must apply for the program by Dec. 31.
"The aim of this scheme is to smooth out extreme foreign-currency rate moves, similar to those we've seen in August," said Roland Natran, state secretary of Hungary's Economy Ministry. Mr. Natran said the arrangement would also help banks by reducing the risk of defaults by borrowers.
Capital Economics estimates that Swiss franc-denominated debt is equivalent to between 15% and 20% of Hungarian gross domestic product, while in Poland and Croatia, Swiss-franc loans amount to roughly 10% of GDP. Most of that is in the form of mortgage loans held by households.
Write to Gordon Fairclough at gordon.fairclough@wsj.com
hungarian forints, debt woes, currency loans, domestic currencies, national economic growth, market turmoil, swiss franc, neil shearing, foreign currency, consumer confidence, repayment program, last decade, hungarians, debt problems online, loan payments, safe haven, borrowers, emerging markets, global market, warsaw
No comments:
Post a Comment