Latvia borrows 150 million from EIB

  • 2005-10-05
  • Staff and wire reports
RIGA - Last week the Latvian government and the European Investment Bank signed an agreement allowing the Baltic state to borrow up to 150 million euros for co-financing needed in order to implement projects supported by EU structural and cohesion funds.
The loan will reduce the risk of Latvia not being able to implement the EU funding with its own funds.

EIB representatives said that this was the largest loan they had extended in the Baltic states. Previously Latvia received 371 million euros from the EIB, Estonia 303 million and Lithuania 280 million.

Both state institutions and municipalities will be eligible to receive funds from the loan to co-finance their EU projects.

The Finance Ministry has said that the loan terms were favorable, including a maturity of up to 25 years.

Finance Minister Oskars Spurdzins said that the EIB was the largest international lender to Latvia. He said that Latvia is not required to make full use of the loan, since it acted as "a safety belt" in case the country runs short of its own funds.

EIB Vice President Sauli Niinisto said that the loan was important for the bank, since it was one of the largest in relation to implementation of EU cohesion and structural funds.

Next year's budget calls for 158 million lats (224 million euros) to be spent on co-financing EU projects. Finance for Cohesion Fund-related projects, the pre-accession fund SAPARD and the PHARE program are estimated at 64 million lats in 2006.

The total value of projects to be carried out with assistance from EU structural funds would amount to 373.38 million lats next year with the required state co-financing reaching 93 million lats, Modris Sprudzans, an advisor to the finance minister, said last week.

Latvia can receive money from the European Regional Development Fund, the European Social Fund and the European agriculture and fisheries funds.

Total amount of support from these funds available to Latvia until 2006 is 625.6 million euros but together with the state co-financing the figure would be as high as 841.4 million lats.

Latvia also can receive over 515 million euros from the Cohesion Fund meant for major transport and environmental projects during the financial period from 2004 to 2006.

Latvia is expected to contribute 148.1 million euros to the EU budget next year, or 22 million euros more than this year, according to the draft budget. The contribution was raised due to the better-than-expected tax revenues and strong economic growth.

The European Investment Bank is a credit institution set up by EU member states to provide loans to members for development projects on terms better than those offered by commercial banks.