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Agreement reached with international lenders on widening budget deficit

By Editor. 07.01.2010

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A preliminary agreement has been reached with the international lenders.

A preliminary agreement has been reached with the international lenders that the Constitutional Court's ruling in the so-called pension cuts case could be implemented at the expense of increasing this year's state budget deficit, as Prime Minister Valdis Dombrovskistold reporters after a meeting with President Valdis Zatlers, informs Leta.

Since the deal with the international lenders stipulates that budget deficit this year must not exceed 8.5 percent of the gross domestic product, and the official deficit projection for this year is 7.5 percent, the money needed for the payment of pensions will be provided by increasing the deficit projection to 8.5 percent.

Already next Tuesday, January 12, the government will review a new letter of intent to be signed with the International Monetary Fund, and an addendum to the memorandum of understanding that Latvia has signed with the European Commission.

If all goes well, pensions could be paid in full beginning February 1 already, stressed Dombrovskis.

At the same time, Dombrovskis made it clear that he was concerned about the Justice Ministry's stance. The Justice Ministry is now analyzing whether altering the agreement with the international lenders requires Saeima's consent. "Much depends on how fast will the Justice Ministry be prepared to offer its legal analysis," said Dombrovskis.

Besides, the deal today was nailed down with the IMF and Commission's missions, and it is yet to be approved by the IMF board and the Commission in Brussels. However, so far the missions' opinion was always endorsed by the IMF board and the Commission.

According to the Welfare Ministry's estimates, if pensions are paid in full beginning February, this will require an extra LVL 110.9 million from the state budget.


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