Part I — Situation overview

On 24 August 2026 the Ministry of Finance announced that it is amending the 2026 budget and raising the annual deficit target adopted by the previous government in early summer 2025, which corresponded to 3.7 per cent of gross domestic product (GDP), to 7.5 per cent. The amended appropriation reckons with a deficit of HUF 7,230 billion. The ministry justifies the step by saying that, according to the review carried out in July after the change of government, without intervention the 2026 deficit would have reached 8.3 per cent of GDP. The announcement explains the difference between 3.7 and 8.3 per cent by the previous government’s pre-election spending, by disadvantageous contracts and by concealed expenditure. The draft was handed over to the Fiscal Council for preliminary opinion on 17 August; the deadline for submission is 31 August. The amendment — on the basis of the Government’s proposal — is adopted by Parliament; the figures now made public are therefore still at the level of a proposal.

The ministry named item by item the components of the improvement between 8.3 and 7.5 per cent: the agreement on restarting EU funds improves the balance by 0.5 percentage points (pp) relative to GDP, the transformation of the public-interest asset management foundations performing public functions (KEKVA) by 0.2 percentage points, and the fall in government securities market yields by a further 0.1 percentage points. The amendment contains some HUF 400 billion of deficit-improving measures already taken — among them the pay cut for members of the government and MPs, the reduction of the costs of the Mohács Danube bridge and the abolition of the Sovereignty Protection Office — and a further HUF 300 billion or so is planned to be saved in the last months of the year. The government will decide on the breakdown by ministry by mid-October. A Disaster Fund of HUF 500 billion is being set up to handle the drought and the energy crisis; the package also contains a HUF 100,000 school-start allowance for 400,000 children in need, VAT exemption for prescription medicines and a cut in the VAT rate on firewood from 27 to 5 per cent. The public debt ratio may rise temporarily in 2026 from 74.6 per cent to 77.5 per cent; according to the announcement the decline restarts after 2026, and the medium-term plan will be published in October, in parallel with the 2027 budget bill.

MIAK has a record on this topic: on 10 August an analysis was made of the legislative turnaround time of the extraordinary session of Parliament, and on 24 August of the long-term debt path and wage convergence. The present entry deliberately proceeds along a different axis: it examines not the macroeconomic sustainability of the deficit but its derivability — whether the items behind the deficit figure can publicly be separated into inherited, crisis-cost and new-decision parts. On MIAK’s reading this is the decisive question: a deficit target becomes a budget constraint if the items behind it can be checked one by one, and if the path of return is not a rhetorical promise but an obligation fixed with a date and a figure. The 7.5 per cent cannot be judged in itself — the absence of the derivation can.

Part II — Foundations in the literature

Before turning to MIAK’s concrete proposals it is worth fixing the scholarly framework in which a deficit target rewritten after the fact can be interpreted. János Kornai (an economist of Hungarian origin, who developed the theory of the soft budget constraint; professor at Harvard between 1986 and 2002) formulates in his work Economics of Shortage (1980) the proposition that the hardness of a budget constraint is not a definitional but an experiential question: what matters is whether the constraint effectively delimits the decisions of the actor concerned — this applies directly to the point that a deficit target overwritten in mid-year is not in itself a constraint, and becomes one only if the conditions of the overwriting are fixed in advance and are verifiable. Carmen Reinhart and Kenneth Rogoff (Harvard economists, researchers who have processed eight centuries of the history of financial crises) describe in This Time Is Different the recurring pattern that crisis-prone states over-borrow in good times, and that the conviction ’this time is different’ is dangerous precisely because it usually is not different — this is exactly the logic by which the divergence now revealed between the 3.7 per cent statutory target and the 8.3 per cent real path came into being. The International Monetary Fund (IMF) report World Economic Outlook 2025 adds the normative side: at the centre of credibility stand the public medium-term fiscal framework, the adjustment path announced in advance and a scenario prepared for shocks, and a fiscal strategy built on a favourable baseline is itself a source of fragility. The detailed treatment of the literature — author by author, with quotations — can be found in section 6.4 Literature in detail.

Part III — MIAK’s concrete proposal

MIAK proposes three measurable measures which do not dispute the size of the deficit but make its derivability and the path of return accountable.

3.1 An itemised statement of the origin of the deficit at the moment of submission (by 31 August)

MIAK proposes that simultaneously with the submission of the amendment of the budget act — not later, not for the general debate — a machine-readable, item-level statement of origin should appear, breaking the HUF 7,230 billion deficit down into four mutually non-overlapping categories: (a) obligations rolled over from the previous budget year and already committed by contract; (b) revenue that failed to arrive or arrived late; (c) the 2026 crisis costs (drought damage, the energy import surplus); (d) expenditure arising from the new government’s own decisions — within the latter, on separate lines, the social package (school-start allowance, medicine VAT, firewood VAT) and the HUF 500 billion of the Disaster Fund. This is the direct application of the G1 data-driven budget and the A1 public money dashboard programme points. Without the fourfold breakdown the debate necessarily turns on whose fault the deficit is, instead of turning on how large the manageable part of it is — and the government’s own verifiable performance (the HUF 400 billion of measures already taken) likewise remains invisible in the debate.

3.2 A date-bound path of return to the 3 per cent reference value (in the October package)

According to the ministry’s announcement the medium-term plan will appear in October, in parallel with the 2027 budget bill. According to MIAK this document must necessarily contain three elements: (a) the year in which the deficit falls below the 3 per cent Maastricht reference value; (b) the size of the annual adjustment in percentage points, not as a promise in words; (c) a pre-fixed deviation-correction rule for the case in which the path slips. The G15 countercyclical fiscal stabiliser (a pre-fixed rule under which the state spends more in a downturn and builds reserves in an upswing) matters here precisely because the present deficit is not the result of a countercyclical decision but inherited and crisis-cost in origin — it was the absence of the countercyclical framework that turned the one-off shock into a correction of the path. In Kornai’s framework (see 6.4.1) this is the point at which the hardness of the constraint is empirically decided: if the date of return slips a year further every year, the rule is not effective.

3.3 Itemised, subsequently auditable publication of the HUF 700 billion of savings (by mid-October)

The government has announced in two stages some HUF 700 billion of more economical state operation (HUF 400 billion in measures already taken, some HUF 300 billion in the remaining part of the year), and will decide on the breakdown by ministry by mid-October. MIAK proposes that this breakdown should appear not at aggregate ministry level but at measure level, indicating for each item the appropriation concerned, the legal title of the expenditure forgone and the expected saving — and that in the course of the 2026 final accounts a subsequent comparison should be made for these same items. This is the putting into practice of the G20 impact assessment system (Drucker audit — a subsequent balance sheet of whether a measure really brought the expected result) and of the G21 organized abandonment principle: the deliberate termination of programmes that do not work can be distinguished from the mere withdrawal of funds only if both the terminated item and the expected effect are public. The ministry itself stressed that “this is not about a withdrawal of funds” — it is itemised publication that makes this statement verifiable.

The three proposals are linked by a single principle: the deficit figure is the subject of political debate, but the structure of the deficit is data. If the structure is public, the debate narrows to the manageable part; if it is not, the origin of the 7.5 per cent can be argued over for years without anyone being able to check the claims of either side.

Part IV — Expected effects and risks

Dimension Expected effect Risk
Economy The itemised statement of origin and the date-bound path of return reduce the risk premium (spread), because the investor sees not the intention but the structure A public path is also a commitment: if an external shock comes, the government either breaks its own rule or is forced into a cycle-amplifying adjustment
Society A separate statement for the social package (school-start allowance, medicine VAT) makes visible what it costs and whom it reaches The divergence between the campaign promise and its implementation — 400,000 children instead of the 700,000 families mentioned earlier — shows up sharply in an itemised breakdown, which carries a political cost
Public administration The measure-level breakdown by ministry disciplines planning and gives a basis for comparison at the final accounts Itemised publication and subsequent audit impose substantial extra work on the budget apparatus of the ministries

The main point of judgement is timing. The itemised statement of origin is most valuable at the same time as submission, because the parliamentary debate can then be about the structure; if, however, it appears only after the debate, it loses its function and becomes mere subsequent justification. The proposal tips to the risk side where the public path becomes a rigid figure with no correction rule: the IMF analysis quoted warns precisely that a fiscal strategy built on a favourable baseline is itself a source of fragility. The risks signalled by the Fiscal Council — the optimistic assumption of a euro exchange rate of HUF 357.5, at which a weakening of 10 forints in itself raises the debt ratio by 0.7 percentage points — show exactly this kind of baseline sensitivity, and MIAK therefore regards the correction rule as part of the path, not as an exception to it.

Part V — Measurability and summary

5.1 What is worth following? (proposed KPIs)

MIAK proposes the following performance indicators (KPIs, Key Performance Indicators) for monitoring — these are proposals, not government decisions:

  • Appearance of the itemised statement of origin: whether the fourfold deficit breakdown is available in machine-readable form on the day the budget amendment is submitted (yes/no, 31 August 2026).
  • Date of return: whether the October medium-term plan contains a concrete year for a deficit below 3 per cent, and the annual adjustment in percentage points (yes/no, October 2026).
  • Delivery of savings: the proportion of the announced HUF 700 billion or so that can be verified item by item in the 2026 final accounts (worth following above 80 per cent, first half of 2027).
  • Turn in the debt ratio: whether public debt relative to GDP actually falls below the 2026 level of 77.5 per cent in 2027 (spring 2028 Eurostat notification).

5.2 Summary

MIAK’s request to the decision-maker can be summed up in a single sentence: publish the itemised statement of the origin of the deficit simultaneously with the submission of the budget amendment, and fix in the October package, with a year number, the path leading back to the 3 per cent reference value. And of the public it asks that the debate should be conducted not about the size of the figure but about the structure of the figure — because the 7.5 per cent is in itself neither a sin nor a merit, and can be interpreted only if it is visible what it is made up of.

This request follows from two MIAK foundational values. Transparency is engaged because separating out the origin of the deficit is the only instrument that can be applied in the same way to any government: if the present government publishes the breakdown now, it thereby obliges the next government to do so too. And data-drivenness, because fiscal credibility — as the IMF analysis also states — depends not on the intention announced but on the existence of a public, quantified framework: an intention cannot be checked, an adjustment path can.

Part VI — Justifications and further sources

6.1 The framing of the press, spectrum by spectrum

The liberal-left and public affairs band placed the emphasis on the revelatory side of the announcement. HVG put the Ministry of Finance’s own wording in its headline (“the budget of reality”), and the structure of the article starts from the divergence between 3.7 and 8.3 per cent — the framing is therefore the uncovering of the inherited situation. 444.hu follows the same structure but gives more space to the list of measures (pay cut, the Mohács Danube bridge, the abolition of the Sovereignty Protection Office) and to the mention of the surplus of nearly HUF 1,000 billion in May–July. 24.hu is the most neutral: it essentially follows the structure of the announcement and hardly supplements it with an interpretative frame of its own.

The economic band brought in the risk side, which the other two bands largely left out. Of Portfolio’s two articles, one builds expressly on the opinion of the Fiscal Council: the body found the draft lawful on the basis of the amended fiscal rules, but at the same time warned of the optimistic exchange rate assumption and of the uncertainty of the GDP forecast, and indicated that the deficit target should be heading towards the 3 per cent level. This aspect — the opinion of the independent fiscal institution (IFI) — practically did not appear in the other bands, even though on the question of derivability it is the most relevant external yardstick.

The pro-government and conservative band framed the news around unfulfilled campaign promises and indebtedness. Magyar Nemzet’s headline (“The Tisza government is permitting itself a gigantic budget deficit”) is evaluative, but the article gives a factual account of the Disaster Fund and the social items, and then raises a single concrete objection: the campaign spoke of a school-start allowance for 700,000 families, while in the budget 400,000 children receive HUF 100,000. This distinction is verifiable in terms of data, and is therefore a substantive contribution to the debate. The paper’s second article presents the argument of Piroska Szalai (Fidesz), according to whom the state of public finances does not justify further indebtedness. Mandiner on that day pursued the topic not from the budget but from the direction of the asset recovery office. All in all: the three bands of the spectrum each supply a different missing element for the others — the uncovering of the inherited situation, the risk signal of the independent body and the comparison of promise with delivery — and the full picture emerges only from all of them together.

6.2 Facts and data

Indicator Earlier value New / amended value Source
2026 deficit target (relative to GDP) 3.7% (act adopted in summer 2025) 7.5% Announcement of the Ministry of Finance, 24 August 2026
2026 deficit without intervention — 8.3% July budget review of the Ministry of Finance
2026 deficit in forints — HUF 7,230 billion Opinion of the Fiscal Council, Portfolio, 24 August 2026
Public debt ratio 74.6% 77.5% (2026, temporary) Announcement of the Ministry of Finance
Balance improvement from the EU funding agreement — 0.5 pp Announcement of the Ministry of Finance
Balance improvement from the KEKVA transformation — 0.2 pp Announcement of the Ministry of Finance
Balance improvement from falling government securities yields — 0.1 pp Announcement of the Ministry of Finance
Deficit-improving measures already taken — ~HUF 400 billion Announcement of the Ministry of Finance
Further planned savings (end of year) — ~HUF 300 billion Announcement of the Ministry of Finance
Envelope of the Disaster Fund — HUF 500 billion Announcement of the Ministry of Finance
Exchange rate assumption in the draft — HUF 357.5/EUR Opinion of the Fiscal Council, Portfolio
Debt ratio sensitivity — +0.7 pp / 10 HUF exchange rate weakening Opinion of the Fiscal Council, Portfolio
Maastricht deficit reference value 3% (unchanged) EU Treaty

Two rows of the table require separate interpretation. The debt ratio sensitivity shows that the draft is particularly sensitive to a single external variable — the exchange rate of the euro: the forint value of foreign currency debt rises automatically as the forint weakens, and the exchange rate assumption is therefore not a technical detail but the most important risk point of the path. And the improvement of 0.5 + 0.2 + 0.1 = 0.8 percentage points explains exactly the difference between 8.3 and 7.5 per cent — this derivation is the only part of the package that is already public item by item, and it can precisely for that reason serve as a model for the full statement of origin.

6.3 Policy dimensions

  • Economy (programme points) — the data-driven budget, the countercyclical stabiliser and subsequent impact assessment are directly engaged; the centre of gravity of the topic.
  • Transparency and anti-corruption policy (programme points) — the logic of the public money dashboard provides the technical model for the itemised statement of origin.
  • Public administration and e-government (programme points) — the measure-level breakdown of savings by ministry is also a question of performance measurement in public administration.

6.4 Literature in detail

6.4.1 János Kornai: Economics of Shortage

Kornai treats the concept of the budget constraint not as a legal or accounting but as a behavioural category: the constraint exists if it actually delimits the decisions of the actor. Deciding this is for him expressly an empirical task:

“Experience may confirm that in a given economy, in a given historical period, given economic actors are effectively constrained by the hard budget constraint.”

The inversion — the soft budget constraint, where the actor can count on somebody else covering its losses — is Kornai’s globally best-known concept, and originally referred to the enterprise level. In the case of the mid-year rewriting of the Hungarian budget act this framework can be applied with reversed sign: here public finance itself is the actor, and the question is whether the deficit target fixed in the act is an effective constraint. After a one-off amendment derived item by item and accompanied by a path of return, the hardness of the constraint can be preserved; but after regular overwriting without derivation the deficit target loses its constraint character and becomes a mere planning signal. MIAK’s proposals (3.1 and 3.2) seek to preserve exactly this hardness — not by reducing the figure but by fixing the conditions of overwriting.

📖 Source: János Kornai: Economics of Shortage

6.4.2 Carmen Reinhart – Kenneth Rogoff: This Time Is Different

The central claim of Reinhart and Rogoff’s work processing eight centuries of sovereign default data is that debt crises are not random but follow a recurring pattern, and that recognition of the pattern is obstructed in every generation by the same conviction:

“the widespread conviction that ’this time is different’ is precisely the reason that it usually is not different — and disaster eventually strikes again.”

The authors also name the mechanism: crisis-prone states over-borrow in good times, and this is what makes them vulnerable in the inevitable downturn. The Hungarian case fits this pattern: in the pre-election period a gap opened between the statutory 3.7 per cent target and the internal forecasts’ path of around 8.3 per cent — that is, the good period was spent not on building reserves but on spending brought forward. The lesson for the present government is not that the deficit has to be brought down immediately, but that the medium-term plan now being prepared should not reproduce the same structure: repeating the logic of ’not possible this year, but next year’ is exactly the illusion the authors describe.

📖 Source: Carmen Reinhart – Kenneth Rogoff: This Time Is Different

6.4.3 IMF: World Economic Outlook 2025

The IMF’s analysis ties fiscal credibility not to the level of the deficit but to the publicity of the framework. According to the report’s normative recommendation, governments have to publish their medium-term fiscal framework with clear, quantified reference values, with an adjustment path announced in advance and with scenarios serving to handle shocks; for it is credibility that puts debt on a downward path. The same report warns sharply against the opposite practice as well: a fiscal strategy built on a favourable baseline or on exceptional growth is in itself a source of fragility. This can be applied directly to the assumption of a euro exchange rate of HUF 357.5 signalled by the Fiscal Council and to the uncertainty of the GDP forecast: MIAK’s proposal 3.2 (a deviation-correction rule as part of the path) supplies precisely the scenario element that the IMF regards as a mandatory part of the framework. The report adds that well-equipped independent fiscal institutions and greater debt transparency are critical conditions of adjustment — in the Hungarian case this strengthens the weight of the Fiscal Council’s opinion.

📖 Source: IMF: World Economic Outlook 2025

6.5 International comparison

Among EU member states the mid-year overwriting of the deficit target is not unprecedented, but the quality of the practice differs. The logic of the medium-term framework recommended by the IMF is applied most consistently by those countries where the adjustment path is fixed not by a government announcement but by a statutory-level, multi-year framework, and where the independent fiscal institution publishes an annual assessment of deviations from the path. The European Union’s revised economic governance framework, which entered into force in 2024, has itself moved in this direction: the emphasis has shifted from a one-off deficit figure to a multi-year, country-specific net expenditure path. The Hungarian amendment is therefore to be interpreted not only in a domestic but also in an EU procedural context: the 7.5 per cent deficit is well above the 3 per cent reference value, and the European Commission’s autumn assessment and the recommendation given under the excessive deficit procedure (EDP) therefore become an external yardstick for the Hungarian path. From MIAK’s point of view this is an opportunity rather than a risk: the multi-year adjustment plan requested by the Commission and the date-bound path of return proposed in point 3.2 are essentially the same document — it is worth preparing it once, well.

Economy

  • G1 — Data-driven budget
  • G15 — Countercyclical fiscal stabiliser
  • G19 — Radical transparency in economic decision-making
  • G20 — Economic policy impact assessment system (Drucker audit)
  • G21 — Systematic review of state expenditure
  • G23 — Public debt sustainability framework

Transparency and anti-corruption policy

  • A1 — Public money dashboard

Proposed new programme point: Statement of the origin of the deficit — for the Economy area: a mandatory, machine-readable breakdown for every budget act amendment of the inherited, the crisis-cost and the new-decision parts of the deficit.

6.7 List of sources

Press sources (MIAK press monitor, 25 August 2026 — topic 1):

Knowledge base references (literature):

  • 📖 János Kornai: Economics of Shortage
  • 📖 Carmen Reinhart – Kenneth Rogoff: This Time Is Different
  • 📖 IMF: World Economic Outlook 2025

Note: in the visible text of the blog only the author and the title are given for the books; the local file path is an internal matter of generation.

MIAK internal materials:

  • MIAK policy area: Economy (programme points; programme point ID: G1)
  • MIAK policy area: Transparency and anti-corruption policy (programme points; programme point ID: A1)
  • MIAK policy area: Public administration and e-government (background material)
  • MIAK press monitor, 25 August 2026 — topic 1, score: 95/100

Supplementary public data sources:

  • Fiscal Council — opinion on the amendment of the 2026 budget act, August 2026; Eurostat — excessive deficit procedure (EDP) notification, October 2026 round; European Union — revised economic governance framework (2024).

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