IMF approves next loan installment

RIGA- On Thursday, August 27, theExecutive Board of the International Monetary Fund (IMF)approved the new Letter of Intent signed by the governmentof Latvia and decided tograntLatvia the second installment of the loan in amount ofapproximately EUR 200 million. In the  end of December 2008, the EuropeanCommission, IMF, World Bank, European Reconstruction and Development Bank andseveral MemberStatesof the European Union agreed on provisions of financialsupport to Latviain amount of EUR 7.5 billion. The loan is being made available to Latvia overthree years in several installments. Minister of Finance Einars Repse added: "Thisdecision approves the actions that the government has taken so far 's amendmentsto the state budget of 2009, elimination of inexpedient spending, reforms inthe public sector. This means that previous decisions have been geared towardsmanaging the economic crises in our country, however, we still need to work inthis direction while preparing the state budget project for 2010. The target ofthe international loan to Latviais to stabilize the economy and restore the economic growth."

"Latvia'seconomy is suffering a much deeper contraction than envisaged at the launch ofthe program," said IMF Managing Director Dominique Strauss-Kahn. "TheLatvian authorities are committed to putting their economy back onto asustainable path, through substantial corrective measures, including additionalfiscal consolidation."

International media, financial markets, and economists havebeen following events closely in

Latvia and news of the IMF decision on Thursday put Latviaintothe spotlight once again. The IMF announcement follows a major speech byLatvian President Valdis Zatlers on August 25 where he urged Latvia'sbusiness leaders, universities, and research institutions to accelerate theirefforts in developing business clusters in order to stimulate innovation andexports.

In recent months the Latvian government has activelyengaged the business community in

developing a strategy for strengthening the Latvianeconomy. At the August 25th conference on business development organized by theMinistry of Economics, leaders of Latvia's most

successful export sectors 's wood processing, chemicals andpharmaceuticals, and transport and logistics offered concrete proposals to thegovernment on how facilitate even greater growth in these and other industries.These proposals were supplemented by experts who participated three highlyproductive panel discussions on tax policy, financial instruments andabsorption of the EU structural funds, and the integration of education,science, and employment policies

A proposal by Minister Artis Kampars to establish prioritysectors in the national economy has been generally welcomed by Latvia'sbusiness community. In addition to the wood processing, pharmaceuticals, andlogistics, other highly promising sectors include the food industry,electronics, production of optical equipment, the metal industry, andmechanical engineering.

Approval of priority sectors would mean increased financialresources for education and worker retraining in these sectors. Nevertheless,other sectors that demonstrate high added value and competitiveness in theexport markets would also receive government support. The Latvian Foreign Ministryhas also listed export promotion as one of its top priorities and has organizedseveral meetings in recent weeks between Latvia's ambassadors and leaders ofthe business community.