Hungary - Money



Hungary's currency is currently linked to an exchange rate control mechanism known as the crawling peg , a mechanism used by the Hungarian National Bank to slowly devalue the currency. The objective has been to gradually make the transition between the forint, historically a non-convertible currency, to a currency that is fully convertible on world markets. Under communism, the currency was not convertible outside the communist bloc countries and an artificial exchange rate applied within Hungary, set by the government. Western currencies sold on the black market during this period typically

Exchange rates: Hungary
forints per US$1
Jan 2001 282.240
2000 282.179
1999 237.146
1998 214.402
1997 186.789
1996 152.647
SOURCE: CIA World Factbook 2001 [ONLINE].

fetched a much higher conversion rate than the official government rate, and such activities were difficult for the government to control. The National Bank, therefore, sets and publishes a daily rate of exchange between the forint and the world's major currencies. This rate is determined by a combination of the market value of other currencies, the inflation rate of the forint, and decisions by the National Bank to change the value of the forint.

As in most economies emerging from communism, inflation in Hungary has been high relative to western economies. Despite concerted efforts by the government to bring inflation into single digits, inflation in 2000 was 10.1 percent. Hungary's inflation during the post-communist transition period, however, has remained much lower than in many other Eastern European countries where rates often rose into the triple digits.

The country's central bank is the National Bank of Hungary, which issues currency and maintains checking and savings accounts. Other financial institutions include the Foreign Trade Bank, which serves businesses trading outside of Hungary, and the State Development Institution, which finances large-scale investment projects. The Budapest Stock Exchange opened in 1990 and is today the most heavily capitalized exchange in the East European region.

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