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Hungarian people lost tens of billions of forints on Golden Visa Bonds

Hungarian people lost tens of billions of forints on Golden Visa Bonds

Budapest, 8 Oct 2018 – Hungary’s residency bond program allowed for the long-term stay of 19,855 non-Hungarians, some of whom exhibit an outstanding national security risk, in Hungary without any reliable background screening. The purchase of Golden Visas had a negligible role in the financing of Hungary’s debts, but resulted in losses of up to 30 billion forints, or, approx. 90 million euros for Hungarian taxpayers – claims a study by Transparency International Hungary and Fiscal Responsibility Institute Budapest, published on Monday at the two organisations’ joint conference.

Though ferociously opposing migration, in 2013, Hungary’s Viktor Orban opened the country’s gates wide to wealthy migrants willing to pay 300,000 euros, the price of a package of Hungarian residency state bonds. A recent study by Transparency International Hungary (TI) and Fiscal Responsibility Institute Budapest (FRIB) highlights that the purchase of “Golden Visas” had disastrous consequences for the country. On the one hand, this program extended the possibility to lawfully reside in the country and in the European Union’s Schengen Zone to 19,855 third country nationals, some of whom pose ponderous security risks, without any thorough background screening. On the other hand, residency state bonds were an unnecessarily expensive instrument to finance Hungary, resulting in the loss of tens of billions of forints on Hungarian taxpayers’ behalf.

Hungary raised funds in the range of 1,666 million euros (approx. 514 billion forints) from residency state bonds, will, however, have to repay 1,844 million euros to bondholders, concluded the research of TI and FRIB. Hungary’s residency state bonds are so-called zero-coupon bonds, issued at a discount price, but at maturity, redeemed at par value. This means that Hungarian citizens pay 178 million euros to rebuy residency bonds, 66.5 million euros more than would have been needed to cover the costs of “standard” foreign exchange bonds, which do not offer the possibility to reside. The amount of 66.5 million euros (approx. 21 billion forints) is the net loss incurred by Hungarian taxpayers thanks to the trade of residency bonds.

The study draws attention to the fact that the Hungarian government could have opted for the European Investment Bank’s (EIB) very cheap long-term credits to finance the country’s debts. Had the government done so, taxpayers would need to pay 90 million euros (approx. 30 billion forints) less, instead, it significantly diminished cheap credits taken from the EIB.

All in all, the Golden Visa business was an economic disaster for both the country and taxpayers, but it formidably enriched intermediary organisations licenced to trade these securities. These entities, all but one of which are registered in secrecy jurisdictions, such as Liechtenstein, Cyprus, the Cayman Islands, Singapore, and Malta, generated profits in the range of 192 million euros (approx. 60 billion forints), at the expense of Hungarian taxpayers’ money.

In addition to generating financial losses, Hungary’s Golden Visa business transgressed the country’s constitution. The public finance section of the Fundamental Law prohibits the transfer of public assets to any organisation with an unclear proprietary background. Still, the Hungarian Parliament, besides adopting the laws that used to have governed the purchase of residency bonds, issued licences to the opaquely owned intermediary agencies.

Golden Visas were a failure for Hungary, says Miklos Ligeti, TI’s head of legal. The anticorruption watchdog’s expert named residency bonds a “Hungaricum”, which resulted in “horrible losses for the state budget, but substantially enriched at the expense of public coffers those unidentified final beneficial owners who lurk behind the mostly off-shore intermediary companies that trade golden visa bonds”.

Balazs Romhanyi, head of Fiscal Responsibility Institute Budapest underlined that “for the last forty years professional management of the government debt has been a crucial prerequisite for the viability of the Hungarian economy”. Mr. Romhanyi found the fact that private interests seem to outweigh public good even in this domain “a completely new and very dangerous phenomenon”.

The study concludes, among others, that the residency bond program was the product of Hungary’s unorthodox economic policy, and obviously aimed at reaching out to potential investors who do not make a great fuss if the money they borrow is allocated without an open call for tenders.

The study by Transparency International Hungary, and Fiscal Responsibility Institute Budapest entitled ‘Corruption by design – the economic and financial impact of the Government’s Golden Visa bonds in Hungary’ is accessible here.

For further information, contact Miklos Ligeti (Transparency International Hungary,, +36 70 396 84 75) or Balazs Romhanyi (Fiscal Responsibility Institute Budapest,, +36 30 703 10 22).

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