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The lita and the euro

  • 2008-12-05
  • TBT Staff in cooperation with BNS
VILNIUS 's Incoming LithuanianPrime Minister Andrius Kubilius has said that there is no chance the countrywould devalue the lita, even if the IMF demanded it.

"We have not and will not plan a devaluation of the litas,"Kubilius told reporters on Thursday.

The prime minister underlined that the International Monetary Fund (IMF)could not force Lithuania to devalue itsnational currency. "It (the fund) cannot demand devaluation as acondition, because we are not planning to borrow from the IMF. We do not see aneed for this. We have a rather good crisis management plan," he said.

However, Kubilius did not comment on what impact a possible devaluation ofthe Latvian lat could have on Lithuania.The IMF has reportedly mentioned that Latviashould agree to devalue its national currency in order to overcome the economiccrisis.

The prime minister said that the first half of 2009 would be the mostdifficult time for Lithuania. "In the firsthalf, we will manage with our own resources," he said, adding thatborrowing could be done in the second half of the year, if needed.

The government will likely need to borrow to refinance 3 billion litas (870million euros) worth of loans falling due next year.

Maastricht

The chief analyst at the Lithuanian branch of SEB Bankas, meanwhile, hassaid that the three Baltic states still face significantobstacles in adopting the euro.

"It would appear that 2013 would be a possible date for euro entry ifpublic finances were reined in and inflation eased. However, if the financiallydifficult time continues and if Lithuania'sinflation remains above the Maastrichtcriterion, euro adoption could have to be pushed back to a later date,"Nerijus Udrenas, the bank's chief analyst, said on Thursday.

Lithuania'spublic sector deficit in 2007 made up 1.2 percent of GDP. Latviaposted a zero deficit and Estonia recorded a 2.8 percent surplus. The required threshold is 3 percent.

Lithuania'slong-term interest rate in October was 4.97 percent and in Latvia,it was 5.9 percent. Estonia's interest rate, at7.85 percent, exceeded the estimated Maastrichtlimit of 6.33 percent.

At the moment, all three countries are comfortably meeting the public debtand currency stability criteria. All three national currencies have been peggedto the euro at a fixed rate.