It’s almost payback time

RIGA - Latvia plans to refinance the proceeds from the 7.5 billion euro international loan bailout package it received by issuing eurobonds, Prime Minister Valdis Dombrovskis (Unity) said on Feb. 10, reports news agency LETA. The first international loan repayment installment is planned for 2012, and this loan will be basically refinanced with eurobond emissions, which will take place either this year or in the first half of next year, which is to be decided by the Finance Ministry, explained Dombrovskis.

Latvia has slowed down remarkably in terms of its international borrowing needs, based upon initial projections, and already in the next round of negotiations Latvia plans to propose that it will not require the entire 7.5 billion euro loan package that remains available, said Dombrovskis.
Altogether, the interest on the loans Latvia has received from the international lenders will total around 90 million lats (128.5 million euros) this year.

This year is the last year when Latvia can receive money from the international lenders, according to the original agreement, and it is currently planned that another 800 million euros will be borrowed, including 600 million euros from the International Monetary Fund and 200 million euros from the European Commission.
Latvia reached agreement on the 7.5 billion euro financial aid with the European Commission, International Monetary Fund, World Bank, European Bank for Reconstruction and Development and several European Union member states in December 2008.

The funding was made available in several installments until the end of 2011, and was meant to stabilize the financial system of Latvia, restructure the Latvian economy, improve the country’s competitiveness and counter the risks that were hindering economic development, thereby creating a solid foundation for sustainable economic growth in Latvia.

According to information on the State Treasury’s Web site, by December 2010 Latvia had received 3.0 billion lats from the international lenders, including 2.0 billion lats from the European Commission, 766.4 million lats from the IMF, 208.7 million lats from the World Bank, and the European Bank for Reconstruction and Development had invested 64.4 million lats into the subordinated and share capital of Parex bank, the collapse of which sent Latvia scurrying to find support from the lenders.