Hungary PM: IMF is lender, but not economic policy setter

Speaking to ambassadors, Orban said Hungary needed to pursue a more pro-active foreign policy and cited Hungary's relations with the IMF as an example, a video of part of the speech posted on local news site Index.hu showed.

Orban's new centre-right government has sent conflicting messages about its plans concerning talks with the Fund after a review of Hungary's existing funding deal collapsed last month. Last week the Economy Ministry ruled out a new loan agreement with the IMF in a statement.

On Monday Orban said: We interpret our agreement with the IMF -- our participation in the IMF's system of cooperation -- as a borrowing agreement. The IMF sees it as an economic policy agreement. This is not in our interest, Orban said.

The Hungarian interest is that if necessary we should make loan agreements with the IMF on a regular basis. It is not in our interest to sign economic policy agreements with the IMF, as that unnecessarily limits the room to manoeuvre of ... the Hungarian government, Hungarian parliament and lawmakers.

Orban did not specify which agreements with the IMF he was referring to. The website clip also showed Orban saying Hungary would have to agree on economic policy with the European Union if necessary.

The prime minister has said before that Hungary would only negotiate with the EU about its 2011 budget plans and that the country was strong enough to finance itself from the markets.

He reiterated on Monday that the only condition Hungary had to meet under its existing financing deal with the International Monetary Fund, which runs out in October, was to keep to the 2010 budget deficit target of 3.8 percent of GDP and to repay the loan.

He also said that if the IMF had not helped Hungary in 2008, the economy would have collapsed.

Zsolt Kondrat, analyst at MKB, said Orban's comments suggested that the government probably wanted to leave the door open for some kind of new IMF deal if necessary after local municipal elections due on October 3 that Orban's Fidesz party hopes to win.

A Reuters poll showed last week that some analysts still believe the government will sign a new IMF deal after the elections, but others say this is unlikely..

Many (analysts) think that a loan agreement remains possible after the local municipality elections. With their rhetoric now they (the government) are creating the ground for that, Kondrat said.

He added that the government's comments suggested it was trying to separate the EU and the IMF, and wanted to first agree with the EU about its economic policy plans and then go to the IMF if necessary to talk about some kind of new financing arrangement.

Hungary has not drawn on any fresh funds from its existing IMF/EU deal since last year, but most analysts said a safety net-type financing deal could work as a buffer if global market sentiment sours.

(Reporting by Krisztina Than/Sandor Peto; Editing by Hugh Lawson)