Hungary Finance

After the Second World War an extensive nationalization process was implemented (as far as industry is concerned, in March 1948 all companies with more than 100 employees were nationalized). A three-year reconstruction plan is being implemented since 1 August 1947, which provides for investments of 6585 million florins, of which 2000 for agriculture, 1745 for mining and industry, 1676 for transport and communications, 1164 for building reconstruction and social progress. A second five-year plan will begin in 1950.

According to collegesanduniversitiesinusa, the state budget has changed as follows in some years after 1938:

The reparations owed by Hungary under the peace treaty constitute a significant burden on the country’s economy: they are divided as follows: Soviet Union 200 million, Yugoslavia 70 million, Czechoslovakia 30 million dollars. The payment should have been made in six equal annual installments; however, the creditor countries subsequently allowed to reduce the burden for the first few years and increase it in the last few years; moreover, in June 1948, the Soviet Union gave up 50% of the outstanding amount.

The monetary inflation that developed in Hungary after the war can be considered a classic example of extreme inflation. In the last phase, circulation and prices soared, surpassing any previous historical example. Monetary circulation, which amounted to 863 million pengő in 1938, had risen to 765 billion by 31 December 1945; the official exchange rate with the US dollar of 3.4 pengő per dollar in 1938, had been raised on 22 December 1945 to 107,000 pengő per dollar. In December 1945, in order to slow the pace of inflation, the face value of the denomination notes of 1000 pengo and above was reduced by 75 per cent; the measure proved completely ineffective and, from January 1946 until stabilization, inflation could no longer be curbed. Of notable interest was the introduction starting from 10 January 1946 of the pengő-tax which, created for the purpose of continuously revaluing taxes, was initially only a unit of calculation, which should have kept its purchasing power unchanged, given that its value with respect to the pengő was changed daily on the basis of changes in the price index; in practice, however, the system of the rate of tax calculation was gradually extended to other operations, in particular credit transactions, and determined – for psychological reasons, connected above all with the daily publication of the price index – a dizzying devaluation of the pengő. The pengő-tax, which was worth 1 pengő on January 1, 1946, was worth 2 trillion as of July 29, 1946. After that, starting from April 19, 1946, to mitigate the psychological effects of the phenomenon, the changes in the price index were no longer followed in full, then the pengő-tax also began to devalue and this devaluation was accentuated when in May notes expressed in pengő-tax were issued by the Treasury. In a short time the pengő-tax, which became the legal means of payment from 9 July, lost all effective value like the pengő and the exchanges were more and more extensively carried out against gold and currencies or with the barter system. Monetary circulation the day before stabilization had risen to around 348 sextillions of pengő. On 5 July 1946 the National Bank quoted the dollar at 296,540 billion pengő on sale. like the pengő lost all effective value and exchanges were more and more extensively carried out against gold and currencies or with the barter system. Monetary circulation the day before stabilization had risen to around 348 sextillions of pengő. On 5 July 1946 the National Bank quoted the dollar at 296,540 billion pengő on sale. like the pengő lost all effective value and exchanges were more and more extensively carried out against gold and currencies or with the barter system. Monetary circulation the day before stabilization had risen to around 348 sextillions of pengő. On 5 July 1946 the National Bank quoted the dollar at 296,540 billion pengő on sale.

On 1 August the monetary reform was implemented: a new monetary unit was introduced, the florin, whose gold content was fixed at 0.0757 g. of fine gold. The notes in circulation were exchanged at the rate of 400,000 quadrillion pengő and 200 billion pengő-tax per florin. Prices and wages were fixed taking into account the level of production and the serious burdens deriving from the war. The official exchange rate with the dollar was fixed at 11.85 guilders per dollar at the sale. To guarantee the stability of the new currency, restrictive measures were adopted, both in the credit sector and in the public finance sector; in particular it was established that the issue of new tickets should not be higher, until July 31, 1947, than ibillion florins and that the state could not have recourse to the credit of the issuing institute until March 1, 1948. The first restriction was subsequently tempered so that circulation rose at the end of January 1947 to 1017 million; on 7 March 1949 it amounted to 2,746 million.

The monopoly of the gold and foreign exchange trade is entrusted to the National Bank; foreign trade policy and the movement of foreign payments are the responsibility of the Supreme Economic Council. In December 1947 the National Bank and ten large banks were nationalized; since January 1, 1949, current account deposits have been centralized with the National Bank, which also practically exercises the monopoly of short-term credit. As of July 31, 1948, bank deposits amounted to 1110 million, those with the postal savings bank to 291 million florins.