Hungary Devalues Currency in Move to Free Market : Economy: The 15% devaluation of the forint should stimulate trade, possibly easing foreign debt but contributing to already high inflation.

The forint will be devalued by 15% against convertible currencies beginning Monday in an attempt to boost exports to Western markets, the National Bank of Hungary announced Friday.

The adjustment will contribute to the galloping inflation that exceeded 30% last year and is expected to soar even higher in 1991 as Hungarians knuckle down to the hard realities of transforming their ravaged economy to a Western-style free market.

But the devaluation will lower the price of Hungarian products sold for hard currency, hopefully stimulating trade and dollar revenue that could be used to ease the nation’s $21-billion foreign debt.

“The devaluation also helps attract foreign investment and it should boost the tourist trade,” said Finance Minister Mihaly Kupa.

Western diplomats said the move would inflict hardship on Hungarian consumers by immediately hiking prices for all imported goods. But they said it demonstrated commitment to reform and edged the forint closer to convertibility.

While the Hungarian forint remains officially unconvertible, for export and exchange purposes its value is pegged to a basket of Western currencies and has fluctuated only marginally since the last official devaluation of 11% in December, 1989.

The national bank gave no precise figure for the new exchange rate, but based on the current average of 61 forints per dollar, the rate should be about 71 forints as of Monday.

Hungary’s action was prompted in part by recent devaluations of the Czechoslovak crown and the Yugoslav dinar. While all Eastern European nations are introducing market reforms, Hungary, Czechoslovakia and Yugoslavia have more advanced industries that are competing to sell to the West.

“With the growth in Hungary’s inflation rate expected to be higher than that of its main trading partners in 1991 and in view of continuing efforts to keep up the favorable processes in the external economy, the move is seen as maintaining the country’s competitiveness on foreign markets,” the Hungarian MTI news agency commented in announcing the devaluation.

About half of Hungary’s 1990 exports were sold for hard currencies and the nation enjoyed a $1-billion trade surplus.

But interest costs on the massive foreign debt--the largest per capita in Europe--are estimated at $3 billion this year, and the twin blows of a global oil crisis and collapse of the ruble-denominated Comecon trade bloc portend a large deficit for 1991.

The Hungarian Democratic Forum gained power after free elections in March by promising a gradual transition that would be less painful than the “shock therapy” employed in Poland, another heavily indebted nation. However, foreign monitoring agencies such as the World Bank and the International Monetary Fund have been pressuring Budapest for more radical measures to wean the populace from dependence on credit.