RIGA - The European Commission (EC) plans to approve a second loan installment for Latvia totaling 1.2 billion euros as part of an international bailout package agreed in December
The next tranche of funds from international donors is expected to total 1.4 billion euros, with an additional 0.2 billion from the International Monetary Fund (IMF) still to come.
EC Representation in Latvia head Iveta Sulca said the European Union remained committed to helping Latvia overcome its economic and social trouble.
All the instruments to overcome the crisis are in the hands of the Latvian government, said Sulca, adding it was of vital importance that structural reforms in public administration, business environment, healthcare and education begin immediately.
At the time The Baltic Times went to press the EC's Directorate General for Economic and Financial Affairs was preparing to draw up the Commission's decision regarding the next installment, as well as an addendum to the loan agreement.
The IMF is investigating the situation in Latvia, and it is still unknown when the IMF could decide to assign the next tranche of funds to Latvia, Prime Minister Valdis Dombrovskis told media.
Dombrovskis said the government is continuing to cooperate with the IMF to receive the funds, adding the installment from the European Commission is of particular significance to Latvia.
Following a formal decision on assigning funds to Latvia, the EC plans to borrow the funds from international finance markets and then give the loan to Latvia with the same interest rate.
Securing the international loan payments has come at a huge cost to Latvia, with the government recently approving measures to slash 500 million lats (711.43 million euros) from national budget expenditures.
Under tough new cuts pensions and public sector salaries will be drastically reduced.
The move has drawn stinging criticism from unions and social advocacy groups.
On June 19, the European Council supported the continued assignment of funds to Latvia in the future.
In their final report at the Council, the leaders of all 27 EU member states included a special paragraph expressing solid support for the budget amendments and the middle-term finance strategy of Latvia.
The member-state leaders said that implementation of the adopted actions, as well as the middle-term finance strategy assures successful accomplishment of the international loan program.
In March the IMF withheld a payment of nearly 200 million euros, warning it would restrict future payments should Latvia fail to implement promised budget and structural reforms.
Latvia had agreed to meet strict conditions under the terms of a 7.5 billion rescue package approved by the IMF and other international lenders to stave off economic collapse.
Dombrovskis has repeatedly warned failure to secure future loan payments would push Latvia to the brink of bankruptcy.