EU – Baltic States, Financial Services, Latvia

First of all, Godmanis' government did not meet the requirement to cut salaries for public sector employees, it also did not freeze pensions. Now, measures have been taken to stop the increase of pensions, but the International Monetary Fund (IMF) representatives do not approve of Latvia's failure to curb salary level by 15%.

The current government's draft plan, which envisages state budget deficit to amount to seven% of the gross domestic product, foresees curbing salaries by another 20%. This is going to be one of the focal matters that the government will draw attention to in talks with international lenders.

Another important question is distribution of the funding, received from the lenders. Part of the resources, which were allotted for stabilization of Latvia's financial system, are now planned to be channeled to cover budget deficit.

As reported, the government launched talks with the International Monetary Fund (IMF) yesterday, proposing draft budget amendments which foresee state budget deficit equal to seven% of the gross domestic product, as the Finance Minister Einars Repse (New Era) informed media representatives.

As Repse comments, it is clear that usefulness of some of the budget programs will have to be reassessed and possibly, some programs will have to be liquidated.

According to him, already just to ensure that the state budget deficit does not exceed seven%, budget spending will have to be reduced by close to LVL 300 million.

Repse also explained that the international lenders have strictly stated that limiting state budget deficit to seven% is not enough, it would have to be curbed more. The international lenders refer to the memorandum that the government of Latvia signed before starting to receive the loan.

The IMF mission in Latvia will end on March 29.