RIGA - The Latvian government has concluded secret agreements with international lenders on the privatization of state-owned companies following the elections, claimed the For a Good Latvia alliance’s prime ministerial candidate Ainars Slesers on the LNT show ‘900 Seconds,’ reports news agency LETA. Information in his possession, he says, indicates that the companies must be privatized by 2012, when the loan repayments are due to begin.
This, however, is just another case of Slesers showing his complete lack of understanding of how state finances are managed, and how public debt is repaid. He claims that since the agreements foresee concrete terms for repaying the state’s loans, “this can only be done through the privatization of these companies.”
The loans will most likely not be paid off all at once, as Slesers believes. It is expected that when the loans begin to become due, Latvia’s economy will have recovered to the point where it will be in a position to return to the public debt markets, allowing it to borrow new money - issue new bonds - which will be used to pay off the international lenders, in effect ‘rolling over’ the existing loans. These new bonds will be gradually paid off as state finances improve.
According to Slesers, this is the reason for the ongoing valuation of state-owned companies. “Why do we need this working group if we are not planning to privatize anything? At present everything is being prepared so that after the elections the privatization of these companies can begin,” imagines the politician.
Meanwhile, Prime Minister Valdis Dombrovskis (New Era) told the magazine Ir that the government is not currently planning to open up the list of companies which are unavailable for privatization. “The government’s position is completely clear - the law on privatization foresees a list of companies not up for privatization - this list includes [electric utility] Latvenergo and Latvian State Forests, and we are not preparing to open it up. There is no secret protocol with the International Monetary Fund,” stressed Dombrovskis.
Dombrovskis also indicated that the privatization of state assets should not be rushed through while the market situation was unfavorable.
Slesers’ current tirades may be due to the fact that he has been left out of these discussions and international lender negotiations.
The final decision on which government-run companies will be kept as state property and which will be sold has been put off until the end of September because of a very large number of suggestions received at the Economy Ministry regarding the matter, the Economy Ministry’s State Secretary Juris Puce said in an interview, reports Nozare.lv. It is unknown right now which state-owned companies could be sold and which will be retained as state property. Furthermore, Puce stressed, the task force vetting state companies does not deal with privatization issues, but evaluates circumstances in which the state should, or should not, be involved in a business.
“The final report will not deal with what companies must be kept as state property, and which companies must be sold. When the task force completes its work, the government will have to decide how the state-owned companies will continue their operations. You should not hope to see in the task force’s document a list of companies that are to be privatized,” said Puce.
He said that an individual decision would be taken on each state-owned company on whether it would be kept as state property, liquidated, reorganized, sold, etc. “The privatization process is over, therefore, if the state decides that it no longer needs a given company, this company may be sold,” said Puce.
The task force was set up to appraise operations of state-owned companies pursuant to Dombrovskis’ decree issued on April 1. The task force is headed by Puce; it includes representatives from the Finance Ministry, Agriculture Ministry, Ministry of Regional Development and Local Governments, Justice Ministry, Economy Ministry, State Chancellery, as well as Dombrovskis’ advisors on legal affairs and public administration matters.
SEB bank President Ainars Ozols said promises by politicians to review the terms of agreements with the international lenders are an attempt to play on voters’ emotions and national self-consciousness. Besides Slesers, the Green Party’s Aivars Lembergs and For a Good Latvia’s Andris Skele have made noises about their displeasure with Latvia’s receiving support from the international lenders.
“We as a bank have also lent to many clients. If the client wishes to renegotiate the agreement, then we are ready to do so. We do not see anything bad in this, as situations change,” noted Ozols. However, he added that the policy of reviewing agreements with the international lenders could be added to the platforms of all the parties, as in fact this already takes place on a regular basis - each quarter the lenders send a mission to Latvia, the budget situation and the latest developments in the economy are surveyed, and based on this, agreement is reached on further measures.
A different situation would arise if, following the elections, one of the political forces decides to break agreements with the international lenders. “As we see, Hungary did not get far down this road - for a short time [this plan] reached the headlines of the newspapers, but not one Hungarian citizen saw their life improve as a result. If we see that the country has begun on a slow but stable road to recovery, the craziest thing would be to upset this,” believes the banker.
He also warned that no great hope should be placed on the kind of swift economic recovery which would allow Latvia to turn down further assistance from the lenders, as the pace of growth which was seen in Latvia before the crisis was not sustainable. “Miracles rarely happen in the world, and the question is, why would the kind of miracle happen here which does not happen elsewhere in the world? The Latvian economy can develop in a balanced way at three or four percent growth, or five at the most, as it must also be kept in mind that there are fewer and fewer people living in Latvia,” said Ozols.
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