From the statements of "the government’s stance did not change" but it "aims to reach a new loan agreement with the IMF", we got to the statement that "the whole thing was a misunderstanding". Behind these communications zigzags there might be the following scenarios:

I. The whole thing was a misunderstanding, the government was only speaking about the Article IV. of the IMF’s Articles of Agreement consultations, which happens once a year in case of every IMF member, when it mentioned that "negotiations on the economic policy with the IMF will continue in the autumn, and it is likely to result in an agreement". The likelihood of this scenario is weakened by the following facts:

1.I Mentioning 'agreement' is likely to cause misunderstanding in the present situation, emphasizing the Article IV. would have been interesting in that case.

2.I The annual consultations based on the Article IV. do not result in agreements. IMF describes its modus operandi the following way: "Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities."

II. Based on these information it is also possible that the government considers the possibility of renewing the negotiations with the IMF, and this was the first step to renew the negotiations, while continuing the policy of double speech. We do not think that this scenario is very likely, as the government can not return to the negotiating table without making a U-turn, and publicly abandoning its previous policy. Assuming political rational, the government rather accepts the uncertainty and the premium it has to pay to buyers of government bonds, and only turns to the IMF, if it has to. According to this scenario the government does not make any stand-by agreement with the IMF, if there is enough market financing available, there will be no agreement. If the global market environment significantly deteriorates, it signs a "usual one", like Hungary has with the IMF at present.

III. The stance of the government published by Bloomberg is suspiciously similar to the one which was the official policy right after the break up of the talks with the IMF, but only lasted for a few days. After that the Prime Minister announced the final break up of the talks, abandoning the previous policy. (When the present agreement expiries in October, Hungary will have nothing to do with the IMF".) It means that a letter with a content similar to the government`s previous stance was sent as a result of a communications mistake, which was flowed by damage control measures. So the government really does not intend to make a loan agreement with the IMF.

At this point we rather tend to accept the third scenario, but it is also possible that if the government experiences that its options are decreasing not increasing without the safety net of the IMF, the possibility of a stand-by loan might become a topic of the negotiations.

After the clarifying press release of the Ministry of Economy, which says that the government does not aim to make a loan agreement, the forint weakened against the euro by 1.5 units, and hovered around 284 forints against the euro."

Source: Portfolio Online Financial Journal