Huge current account and budget deficits and national debt levels that threatened to spiral out of control forced the government to launch a sweeping austerity program in March that slashed social benefits and reduced public sector employment.
The budget was passed by 249 votes in favor to 88 against and two abstentions. The socialist-liberal ruling coalition holds a large majority of the seats in parliament.
The deficit of the central government's budget will fall to 133 billion forints ($953.2 million) in 1996 from an expected 156 billion ($1.1 billion) this year.
The shortfall of the wider public sector, including the central government, state health and pension fund and local municipality budgets, is projected to fall below four percent of gross domestic product next year, compared with an expected 6.2 percent this year and some eight percent in 1994.
The austerity program, which is expected to have reduced real wages by around 10 percent by the end of this year, saw the government's popularity slump.
The measures have begun to show effect, however, with inflation slowing and Hungary expecting to hit its budget target this year.
The current account deficit is seen dropping below $2.9 billion this year from almost $3.9 billion in 1994.
The International Monetary Fund sees Hungary's reforms to be taking the economy in the right direction.
On Tuesday an IMF delegation concluded talks with the government, saying it was close to extending a stand-by loan facility that would represent a crucial seal of approval of the program.
The agreement depends on Hungary cutting back on state social security expenditure for next year.
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