BUDAPEST, June 3 (Reuters) - Hungary's government plans further budget cuts by weeding out red tape and streamlining inefficient state-run companies and local government bodies, the prime minister said on Wednesday.
Hungary's economy hinges on a $25.1 billion International Monetary Fund-led lifeline and the government has already pledged spending cuts worth 1,300 billion forints ($6.57 billion) this year and next to prevent a runaway budget deficit.
"There are some further frugality steps that Hungary will have to take in terms of its budget," Prime Minister Gordon Bajnai told radio channel mr1 Kossuth in an interview.
The IMF and the European Union let Hungary raise its deficit target to 3.9 percent of gross domestic product this year from an earlier 2.9 percent as a bigger-than-expected downturn eats away at budget revenues.
The deficit will drop to just 3.8 percent next year when the economy is expected to shed a further 0.9 percent and the central bank has already warned that the deficit could hit 4.5 percent in 2010 unless planned further measures are taken.
On Wednesday, the prime minister said the government was considering further budget cuts to contain the deficit.
"The state must be more economical, it must cut back on squandering and in these areas there are further measures that must be taken, but these are measures that have a direct impact on Hungarian citizens to a much lesser extent," Bajnai said.
He did not go into further detail. (Reporting by Gergely Szakacs, editing by Mike Peacock)