Hungary has reached an agreement with Russia’s Gazprom to defer payments for gas supply during winter, which may ease pressure on the Forint and the widening current account deficit.

The trade deficit in Hungary has expanded in 2022, as a result of soaring energy costs, leader to a weaker Forint, which plummeted to all-time lows against the Euro on Monday.

MVM energy group has agreed to defer payments to Gazprom for gas purchases, should the prices go beyond a specific threshold. In the event of a price surge, MVM will be permitted to pay for the gas over three years.

"We agreed on a threshold value, and the part exceeding this we don't have to pay for now, but it goes into deferred payment," Development Minister Marton Nagy told Reuters news agency. 

The agreement is in place for six months, he went on to say, and could ease the link between soaring gas prices and the Forint, which has declined as the price rose.

Taking into account the current market spot price, the agreement means as much as €1 billion worth of deferred payments. Should the price rise to €300/MWh, deferred payments could amount to between €3.5 billion and €4.5 billion, Reuters reports.

MVM will have up to 30 days to purchase the required Euros on the market for the gas, as opposed to five days, which may alleviate pressure on the Forint market.

The currency, which plummeted to all-time lows past 425 to the Euro on Monday morning, rose to 421 by 14:30 GMT.

"This is positive news for the budget, it means a smaller burden on this year’s budget, and a decreased need for foreign currencies, which will make financing easier," according to an FX trader in Budapest.

"This will not patch all the holes in the budget, but it means an easing of the burden. But we still need those EU funds, the government will need to do everything to get that money," the trader added.

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