It also warned that further measures should be taken to increase inflow and reduce expenditure. The IMF particularly pointed at major state-owned companies, whose money losing operations were taking a big chunk out of the central budget.

National Economy Minister Gyorgy Matolcsy said Hungary had openly discussed the serious problems resulting from failed budget management by the previous administration in the first half of the year.

He explained the bank tax and public sector salary caps -- including the intended cut in Simor's salary -- were needed to make up the budget shortfall.

The minister also underlined the government's commitment to turn Hungary into the most competitive, reliable and trustworthy country in Central Europe.

Matolcsy said the government was ready to continue negotiations with international organizations including the IMF and the EU. The EU also objected to the bank tax and the central banker's salary cut.

Internet news portal index.hu reported Hungary wanted to increase this year's deficit to as much as 4.5 percent of GDP. Neither the Hungarian government nor the IMF confirmed it.

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