The Hungarian government continues to hold equity in a few banks. These include the National Savings Bank, Rt. As a result of legislation passed in early 1996 designed to satisfy entry requirements into the OECD, the Hungarian forint became fully convertible for current account transactions and capital account movements. Given the high and relatively volatile inflation rate in Hungary, long term borrowing in forints at fixed interest rate is difficult. Most lending by commercial banks generally takes place at a floating interest rate, and for periods shorter than one year.
Companies have a hard time obtaining business loans from the limited pool of available funds.
The capital shortage stems from the crowding-out effect of the governmental debt and interdependency of banks and companies. Non-recourse project finance is a relatively new concept in Hungary and most such loans are denominated in foreign currencies. This sector is expected to rapidly accelerate with the planned construction of approximately 2,500 megawatts of new electric power generating capacity starting in 1998. Importers are restricted from making foreign currency cash payments abroad exceeding a quarter million forints. The U.S. Export-Import Bank provides financing in Hungary.