RIGA - Latvia will probably win a credit rating upgrade because of deficit-cutting and the outcome of parliamentary elections, said Finance Minister Andris Vilks, reports Bloomberg. “Latvia in the near future will get a credit rating upgrade,” said Vilks, on the Latvian Independent Television program 900 Seconds on Sept. 30. “The election results show that Latvia will continue its path.”
Prime Minister Valdis Dombrovskis’s Unity and former President Valdis Zatlers’s Reform Party together took 42 of the legislature’s 100 seats, more than any other party in a Sept. 17 election. The two parties are considering a coalition with either Harmony Center, which has 31 seats, or the National Alliance, which has 14.
Fitch Ratings, Moody’s Investors Service and Standard & Poor’s have positive outlooks on Latvia’s credit rating. Moody’s and Fitch rate its debt at the lowest investment grade, and S&P rate Latvia one level below investment grade.
The country plans to cut its budget deficit to 2.5 percent next year to adopt the euro two years later. Vilks initially estimated the size of budget measures needed would be between 100 million lats (142.8 million euros) and 110 million lats. “I can’t say a specific sum, that will be known in the next few weeks,” Vilks said.
The final sum will have to be worked out with the European Commission and the International Monetary Fund, which led a group that granted a loan package of 7.5 billion euros to Latvia after its second-biggest bank - Parex Bank - needed a state rescue.
The measures will be mostly expenditure cuts, possibly more than two-thirds of the total, with the rest coming from the gray untaxed economy, Vilks said.
President Andris Berzins on Sept. 29 gave the parties one week to come together and form a coalition. Vilks said he probably won’t return as finance minister under a different prime minister. “I really doubt that I would want to work for another prime minister other than Dombrovskis,” he said. “I don’t see a better prime minister candidate.”