Hungary to launch $128 million school-start benefit scheme

BUDAPEST, July 2 - Hungary will launch a means-tested school-start benefit program at a cost of 40 billion forints ($128.41 million) per year, Prime Minister Peter Magyar said on Thursday, adding new spending after a surge in the budget deficit in early 2026.

Magyar, who ousted right-wing leader Viktor Orban in an April election landslide, warned on Monday that the budget deficit would come in much higher than earlier estimates driven by Orban's pre-election spending.

His government estimates the 2026 shortfall at more than 7% of economic output, which could be the European Union's largest, even with the favourable impact of a political agreement on the release of billions of euros' worth of suspended EU funding.

"No child in Hungary should suffer a disadvantage merely because their families live in difficult circumstances," Magyar said in a Facebook video, adding that the 100,000 forint grant paid in two halves would benefit 400,000 children.

He said the grant would be linked to existing social support measures and offered to children receiving a higher-rate family allowance due to a chronic illness or severe disability, special needs children or single-parent households, among others.

Official statistics released on Wednesday showed Hungary's budget deficit surging to 9% of gross domestic product.

Magyar's Tisza party has said a sweeping anti-corruption drive, more transparent public procurement, lower spending on what they described as government "propaganda" under Orban and falling debt financing costs would help shore up the budget.

"The Tisza party must now contend with competing promises, including additional fiscal support measures it pledged during the election campaign and its aim to lower the fiscal deficit to 3.0% of GDP by 2030," rating agency Morningstar DBRS said in a note.

"We are of the view that reducing budgetary pressures in a lasting manner will require structural fiscal consolidation efforts both on the spending and the revenues sides which go beyond what has been announced so far." REUTERS