RIGA - Prime Minister Aigars Kalvitis told the press last week that the government may allocate 50 's 60 million lats (71 's 85.3 million euros) from the 2006 budget to compensate low-income groups for rising prices.
Though he pointed out that inflation has been slowing down in recent months, Kalvitis said the government had to consider the possibility of compensating low-income people for price hikes.
Since Latvia's accession to the European Union, the rate of inflation has risen steeply and last year was the highest among the bloc's 25 members. Consumer prices this March were 6.4 percent higher compared with the same month in 2004. Analysts have already warned that in the future, prices might be pushed up by increases in commodity prices.
The prime minister added that his Cabinet intended to raise the minimum wage by 10 lats to 90 lats and the minimum untaxable wage by 6 lats to 32 lats and pensions that are not higher than 105 by 6.32 lats.
Though the populist measures may soothe the nerves of inflation-weary Latvians, they are bound to raise the ire of monetary purists who are advising the government to cut spending and reduce the deficit from 2 percent to 1 percent of GDP as a means of stemming runaway inflation.
Last week the International Monetary Fund, in its report on the world economy, said that it does not expect price-growth to subside in Latvia over the next few years and has estimated 5.7 percent inflation this year and 5.3 percent in 2006. This places Latvia second only to Romania, which, according to IMF predictions, will see inflation of 8.2 percent this year and 5.7 percent next.
