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Latvia still under pressure

By Anatol Steven. 06.07.2010

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The government of Latvia will be under pressure to cut budget costs for the forseeable future.

The Latvian government will have to slash as much as EUR 630 million in costs in next year’s budget if it intends to meet the terms of its bailout loan, the International Monetary Fund’s mission chief for Latvia has warned.
“The Latvian economy is stabilizing, but the government is involved in a very difficult strategy,” Mark Griffiths commented at a press conference in Riga. “Much remains to be done.”
But there are clear signs that the government’s strategy is working, Griffiths conceded.
“We estimate that further adjustment in the budget of between EUR 565 million and EUR 630 million is needed,” he said.
The board of the IMF may consent approval for a further disbursement for Latvia of EUR 100 million in July, if it feels the country has done enough to warrant it. In addition, the European Commission may release another EUR 200 million of its loan.
In total, Latvia could receive approximately EUR 1 billion in financing if the top-ranking officials from the institutions involved concur.
Earlier, Latvia agreed with its lenders that it would continue borrowing only from the IMF, the EU and the World Bank, Latvian Prime Minister Valdis Dombrovskis reminded at the press conference, and that it would not use bilateral loans from other countries for now. Scandinavian countries, Estonia, Poland and the Czech Republic have already stated that they could lend funds to Latvia as part of its international loan program, if it needed them.


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