Latvia exits rescue package

  • 2012-01-04
  • From wire reports

RIGA - Financially speaking, it was a good year after all for Latvia. It moved off of international loan life-support, made a good showing in the global financial markets, and paid the interest on its borrowings.
In 2011, Latvia paid 94.1 million lats (134.4 million euros) in interest on the international loan money, said the Finance Ministry, reports LETA. In 2009, the country paid 8.6 million lats in interest; in 2010 it paid 59.8 million lats.
For 2012, Latvia will have to pay 99.3 million lats in interest on the international loan program borrowings; in 2013 it pays 91.1 million lats; in 2014 the total is 81 million lats.

This year, Latvia will begin repaying the loan itself; 241 million lats will be paid back to the International Monetary Fund. The country will also have to settle its remaining external debt in the amount of 12.4 million lats and external debt of 253.4 million lats.

Latvia officially concluded its three-year international loan program, during which the country implemented stringent austerity measures to stabilize its finances after the economic downturn. The final memorandum regulating the European Union’s financial assistance was signed Dec. 21. The IMF’s board also supported the conclusion of the loan program.

The planned amount of the international loan package was 7.5 billion euros, but since the economic and financial situation has improved, Latvia did not use the full amount of the loan. By now, 4.4 billion euros has been used. Latvia has to repay the loan by 2025.
“While there is [still] a deficit in Latvia’s budget, we cannot speak about settling the country’s debt. However, we can refinance it on beneficial terms,” Prime Minister Valdis Dombrovskis (Unity) said in an interview with Latvian State Radio on Dec. 28.

“This year was spent positively. We have successfully concluded the international loan program, returning to [that group of] countries who can deal with their own economies,” said the prime minister, adding that “at the moment, it is important how Latvia will refinance the loan.”

Dombrovskis repeatedly emphasized that it is necessary to continue observing fiscal discipline. The prime minister rejected, though, the possibility that the country’s debt could grow if refinanced. Nevertheless, he pointed out that it is vital to borrow on financial markets at reasonable interest rates.

The European Commission’s loan program will formally conclude on Jan. 20, because the commission’s final loan installment will be received on that day, a month later than the final loan installment from the IMF.
After the conclusion of the program, the international lenders will continue to monitor the situation in Latvia in order to supervise the country’s development and ensure a balanced repayment of the loan.