OREANDA-NEWS. February 19, 2015. Hungary's central bank is doubling the size of a programme that provides cheap lending, saying the move could add one percentage point to economic growth.

The bank said on Wednesday it would add a 500 billion-forint (\\$1.9 billion) scheme to its existing programme to provide cheap money to banks for lending to companies.

The extra money is for this year. It comes on top of almost 500 billion forints already available this year in the existing programme.

"This means growth can be 3-3.5 percent this year and hopefully in 2016, too," the bank's governor, Gyorgy Matolcsy, told a news conference, adding that the bank's past interest rate cuts had also fuelled economic growth.

In the new scheme, the central bank lends money to commercial banks at no interest rate. They can then lend it small and medium-size companies at interest rates no higher than 2.5 percent.

The change from the earlier programme is that the central bank will take over some of the lending risk from commercial banks, for limited amounts and periods.

The bank said it could not launch a programme similar to the European Central Bank's direct purchases of assets, such as government and corporate bonds, because Hungary's securities market was not deep enough. But the central bank is working with banks on proposals for developing those markets, Matolcsy said.