Hungary and the IMF: On Getting to Yes

2012. november 7. 11:48

Ferenc Kumin
Ferenc Kumin's Blog
The point is that reasonable people may disagree about the right policy prescription for these times of economic crisis. And given the sometimes differing interests and objectives of the IMF and a government that must be accountable to its citizens, it’s perfectly understandable if the two parties sometimes disagree.

"We’ll all be interested to see what the European Commission has to say when it publishes its fall economic forecast on November 7th. But while we’re on the topic, let’s put some basic facts on the table about the IMF and Hungary.

The mission of the IMF is to support international financial stability. It is accountable to the Fund’s 188 countries that pay into the Fund as members. The member countries are much like shareholders in the organization, each member carrying a weight proportional to the number of quota shares it has. The Government of Hungary, on the other hand, is accountable to the citizens of Hungary. It came into power in 2010 after a landslide victory at the polls, elected on a mandate for change and reform following a long period of economic and social stagnation. (...)

The Orbán Government took office committed to creating jobs. We want to build an employment-based economy, and that’s why the Government promoted a flat tax on labor and profits. We don’t want to tax labor but have opted instead for taxing consumption. The IMF has recommended abandoning the flat tax and moving to a progressive tax to raise revenues. On the social policy front, the Government of Hungary has passed measures to support families because we’re concerned about grave demographic trends. We also want to support education, encourage people to get back into the workforce and ensure the stability of the pension system. We have held fast to those measures, but they aren’t necessarily congruent with the IMF emphasis on cutting expenditures. The IMF isn’t necessarily concerned with long-term demographic trends. Why should it be? But the Government, accountable to the Hungarian voter, is."

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