Hungary strikes deal with Russia’s Gazprom as gas bill threatens economy

(Bloomberg) — Russian energy giant Gazprom PJSC will allow Hungary to delay payments for natural gas if necessary, as soaring imports threaten to upend the country’s already strained budget.

The delay is for bills coming due this winter, Hungary’s state-owned power company MVM Zrt. said in a statement on Monday. “The possibility of temporary delayed payment widens the financing maneuvering room for MVM and boosts its liquidity position,” MVM said. 

Soaring energy payments are aggravating concerns about the state of Hungary’s economy. Billions of euros in European Union funding are currently blocked over concerns about corruption and cronyism under Prime Minister Viktor Orban, international reserves are below the level needed to cover at least three months of imports and the forint is trading at all-time low despite the EU’s highest key interest rate. 

Hungary is one of the EU nations most reliant on Russia for energy, and has seen the cost of oil and gas imports soar to an estimated $19 billion this year from $4 billion in 2019, according to government data. 

Additional purchases of natural gas from Gazprom, on top Hungary’s long-term contract, will cost the budget an extra 740 billion forint ($1.7 billion) this year and widen the budget deficit to 6.1% of gross domestic production from a targeted 4.9%, Finance Minister Mihaly Varga said on Sept. 23. 

The forint fell 4% against the euro in the past week to a record low. That took its year-to-date loss to more than 13%, the third-worst in emerging markets after the Argentine peso and Turkish lira.