“A lot of people wished we cannot meet our deficit targets. For our part, we worked hard to cut spending, to rationalize state institutions, and to collect all revenues. As part of the latter effort, we applied special scrutiny before paying VAT reclaims.

“What should a government do when it sees that revenues are a way under the level expected earlier, and there’s no explanation for that? Until the EU accession in May, revenues came as expected. However, after that point state revenues from VAT were well under our darkest forecasts. In response we introduced stricter procedures for paying VAT reclaims, and only paid the due sum after the National Tax Office (APEH) established that all the transactions reported by the taxpayers were proved.

“However, the EU VAT system gives us information on transactions with a three-month delay, and until then we cannot reconstruct if the reported payments indeed have been made. To date, as much as 10% of our controls have showed that reality was different from taxpayers’ reports.

“It is also important to state that changes on import regulations have meant a HUF 250 billion temporary loss for the central budget. This sum is being used by the importers temporarily. Consider it a loan.

“We see that our economic program has met its goals. We wanted a change in the economic tendencies; we wanted to return to an export- and investment-driven economic growth, which is based on lowering the formerly huge public sector deficit. Tendencies behind economic growth have become healthier than earlier; increase of real wages and of residential spending has slowed down, and we managed to bring down public sector deficit by 1 percentage points.

“Quite naturally, I am not satisfied yet, but we are on the right path, and it will be reaffirmed by the 2005 budget.”