EU – Baltic States, Financial Services, Latvia, Loan

According to unofficial information, the issue will most likely be included on the agenda for the government's meeting today, as the newspaper Diena writes today.

This, however, should not be regarded as Latvia turning for financial help to the IMF and the Commission, as a number of countries have done already, including Hungary, Ukraine and Serbia. The government will not seek help because the situation is not that bad in Latvia, it will rather be a decision on launching the necessary preparatory work for appraising the options for borrowing money from the IMF and the Commission if the economic situation declines in Latvia and the world, as government sources told the newspaper.

According to the Finance Ministry spokeswoman Diana Berzina, there have already been informal consultations with international institutions, including the European Commission, regarding loans for Latvia. Berzina did not say whether the government could apply for a loan from the IMF and the Commission, she only said that the government today will consider measures for implementation of the 2009 national budget, as well as hear Finance Minister Atis Slakteris' (People's Party) report regarding measures for improving the liquidity of Parex banka.

The interest on loans provided by the Commission and the IMF is lower, and the repayment term longer than with other loans. There are certain preconditions for the IMF and the Commission's loans, the money that a government borrows from the IMF or Commission must not be used to cover public administration or national budget expenditures. The Commission, the IMF and the World Bank, upon issuing a loan to a government usually also set a number of requirements, for instance, limiting government expenditures, carrying out structural reforms, strengthening the competitiveness of the national economy, and others.

The IMF offices in Latvia were closed a few years ago. The IMF experts issue reports on the Latvian economy on an annual basis, but the Latvian government has been rather critical of these reports over the past few years. In 2006 the government of Aigars Kalvitis (People's Party) was very skeptical about IMF experts' opinion that the government should take measures to prevent the Latvian economy from overheating, as well as limit the increasing budget expenditures, the lending rate, and pay more attention to control over the banking sector.