Government earmarks up to EUR 1 billion to mitigate economic effect from Covid-19 crisis

  • 2020-03-13
  • LETA/TBT Staff

RIGA - To mitigate the negative effect the ongoing Covid-19 crisis is having on the Latvian economy, the government will release up to EUR 1 billion in the form of various financial support instruments to businesses, Prime Minister Krisjanis Karins (New Unity) told journalists.

On Friday, the prime minister met with Bank of Latvia Governor Martins Kazaks and Cabinet ministers to discuss how to lessen the impact from Covid-19 on the economy. 

The prime minister indicated that most probably, the negative effect from Covid-19 on the global and Latvian economy will be short-lived and last one to two months. Karins also believes that the current calamity cannot be compared to the financial crisis that hit Latvia in 2008. "In comparison with 2008, we are in a good situation, because this is not a structural crisis with excessive debts," the prime minister said. 

To help the businesses affected by the spread of Covid-19, the government is ready to allocate up to EUR 1 billion to various financial instruments. Some of these Treasury funds will be made available at the Development Finance Institution Altum (Altum) and banks' programs, for instance, loan guarantees, in order to support companies suffering a short-term turnover slump. 

In Karins' words, the Cabinet of Ministers will decide on the launch of the Altum program next week. 

Finance Minister Janis Reirs (New Unity) added that Treasury funds will be used not only for loan guarantees but also export guarantees, tax breaks and financing sick leaves. Estimates suggest that the financial impact from the coronavirus-related sick leaves will reach EUR 200 million. 

Reirs explained that government support is being planned in the form of financial instruments and not grants. "Entrepreneurs are not asking to support them with grants, they are asking for loan extensions, as well as short-term financing options. So there are no plans for a grant program. Although the financing of sick leaves can be considered a grant, we will not ask the entrepreneurs to return that money," the finance minister said.

Asked about the sectors that will be provided government support, Reirs said that tourism, food service and hospitality services providers are currently suffering the most but that assistance will provided to all businesses in need. 

As reported, in an effort to prevent Covid-19 from spreading further in Latvia, a state of emergency comes into force from today, setting a number of tough restrictions. The state of emergency is in force from today till April 14 with the aim to contain the spread of Covid-19.