Introduction

The legal framework for government debt management involves several laws. The most important of these are the Act on Public Finances (Act XXXVIII of 1992), the annual Budget Acts, the Civil Code (Act IV of 1959) and the Capital Market Act (Act CXX of 2001). These laws –inter alia - provide the definition of debt, the rules for the creation and financing of debt and the scope of government agencies and organisations authorised and obliged to perform government debt management.
As the first step in the reform of public finances, the organisational framework of government debt management was renewed: from March 1, 2001, government debt management has been performed by an independent corporation, the Government Debt Management Agency Limited (ÁKK).

ÁKK is a single shareholder company registered by the Court of Registration. The company is solely owned by the Hungarian state, the ownership rights are exercised by the Minister of Finance. The company is controlled by the Board of Directors. The operation of ÁKK – unless otherwise provided by the Public Finances Act – is governed by the Companies Act (Act CXLIV of 1997). Operations are supervised by the Supervisory Board and the company's auditor. In addition to these internal management and control mechanisms, the process of debt management is regularly audited by the State Audit Office. Activities of the Government Debt Management Agency Limited are closely interrelated with operations of the Hungarian State Treasury. Operations of these organisations are professionally coordinated and controlled by the Minister of Finance.

Role of the Minister of Finance

Pursuant to the Act on Public Finances (Act XXXVIII of 1992), the Minister of Finance is authorised to finance the budget deficit, record and repay the government debt. Accordingly, the Minister of Finance (subsection b), c), g) and l) of Section 48 of  Public Finances Act)

- Ensures budget execution […],
- ensures that the outstanding amount and interest payment of the Central government debt is properly recorded and debt is repaid in due course,
- provides the financial administration for the execution of Treasury circle  members’ budget, finances the deficit […],
- Regulates the order of budget planning and of the appropriations of the revenues and liabilities of general government.

Under these functions and through Government Debt Management Agency Limited, the Minister of Finance (paragraph (1) of Section 113/A. of Public Finances Act)

a) on the basis of the annual Budget Act and with taking into account the forecast rendered in subsection p) of paragraph (1) of section 18/B ensures the solvency of the state budget,
b) ensures  that the central government deficit and debt redemption are financed, and that the government debt and the temporarily liquid funds of the state are properly managed,
c) records the central government debt.

The Act on Public Finances is in accordance with Section 28 of the Civil Code, which authorises the Minister of Finance to represent the Republic of Hungary in civil law relationships. The general authority provided under the acts referred to above is specified in the annual Budget Act by assigning the financing and debt management duties for the current year to the Minister's authority.

Role and duties of ÁKK

The Act on Public Finances provides that the Minister of Finance executes financing and government debt management functions through the Government Debt Management Agency Limited. The following authorisation is given under Section 113/A of the Act on Public Finances:

a) Develops the government debt management strategy and elaborates the annual and medium-term financing plans of the central government.
b) Raises loans and issues government securities in compliance with the annual Budget Act and organises debt-assumptions from public institutions to the State.
c) Effects government debt redemption.
d) Organises the secondary market of government securities.
e) Manages government securities transactions in the secondary market, sells, buys and lends government securities, executes repo transactions, concludes prompt, forward and hedging transactions in order to reduce interest and exchange rate risks and carries out securities management and custody tasks.
f) Prepares analyses on government debt service and securities market developments.
g) Provides information on the status of government debt and on government securities market developments.
h) May perform tasks related to the issuance and mangement of  government guaranteed debt securities and loans.
i) Reviews the conditions of loans and bonds issued under individual state guarantees.
j) Performs credit and deposit transactions.

To implement these tasks, in relation to debt securities issued or guaranteed by the state, the Act on Public Finances authorises the Government Debt Management Agency to provide securities brokerage and securities trade services, services related to the arrangement of securities offering, securities and client account management and securities custody services in line with the Capital Market Act.