BUDAPEST, Dec. 30 (Xinhua) -- Moody's Ratings late Monday downgraded the City of Budapest's long-term issuer ratings to Ba1 from Baa3 and placed them on review for further downgrade, citing weakened liquidity, uncertainty over government transfers, and ongoing disputes with the central government.
Moody's said the downgrade followed the disclosure of Budapest's liquidity position, which raised concerns about the city's ability to meet all financial obligations by the end of 2025. While current projections indicate that the city can repay its debt, very weak cash buffers and uncertainty over the timing of ordinary government transfers have significantly increased near-term credit risk. The ratings previously carried a negative outlook.
The agency noted that Budapest faces challenges in securing short-term funding and repaying an outstanding overdraft facility amid an uncertain operating environment. Delays in central government transfers, including funding for public transportation, and unresolved disputes over payments of the Solidarity Tax have reduced budget predictability.
According to Moody's, the Solidarity Tax paid by Budapest rose to 76 billion forints (23 million U.S. dollars) in 2024 and is expected to increase to 89 billion forints in 2025, accounting for about 21 percent of projected revenue. Restrictions on new long-term borrowing and limited access to European Union funds have further strained liquidity.
Budapest Mayor Gergely Karacsony said on Tuesday that the downgrade reflects tensions between the city and the central government.
Moody's warned that failure to repay the overdraft by year-end could lead to a further downgrade. (1 Hungarian forint = 0.0030 U. S. dollar) ■