Overnight, the IMF, the European Union, and the World Bank announced a joint 20.5 bn EUR (USD 25 bn) financial package for Hungary. Together with the recent 17 bn EUR FX reserves, this package is sufficient to cover EUR 33bn of external financial needs of the country over the next 12 months. HUF is up strongly since the announcement. The other Eastern European currencies are also stronger given that there is now a back-stop of support by global financial organizations. This deal was less intrusive than Iceland but then Iceland became an extreme.
The IMF is now moving on an Iceland loan as well as talking with the Ukraine. The IMF board waived demand for fiscal austerity from borrowers which was a major issue with many countries. The IMF strings attached to loans were just too great in past crises. This more measured behavior by the IMF has been supportive to all emerging currencies.
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