IMF approves next loan installment

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

"Latvia's economy is suffering a much deeper contraction than envisaged at the launch of the program," said IMF Managing Director Dominique Strauss-Kahn. "The Latvian authorities are committed to putting their economy back onto a sustainable path, through substantial corrective measures, including additional fiscal consolidation."

International media, financial markets, and economists have been following events closely in

Latvia and news of the IMF decision on Thursday put Latviainto the spotlight once again. The IMF announcement follows a major speech by Latvian President Valdis Zatlers on August 25 where he urged Latvia's business leaders, universities, and research institutions to accelerate their efforts in developing business clusters in order to stimulate innovation and exports.

In recent months the Latvian government has actively engaged the business community in

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

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

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

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