RIGA - In an attempt to attract more foreign investment to Latvia and show local willingness to continue reforms, Finance Minister Gundars Berzins and Bank of Latvia President Einars Repse have signed an economic cooperation memorandum with the International Monetary Fund.
"Latvia's government has accepted an economic policy program where the main goals for developing Latvia's macro economy is stipulated," said Baiba Melnace, spokeswoman for the Ministry of Finance. "This is good for Latvia's image, and it will attract foreign investments."
Recent years have brought increased economic stability to Latvia, helped in part by some austere fiscal management.
The main goals of the memorandum are to continue economic growth, secure the Latvian economy from vulnerability and obtain European Union membership as soon as possible.
"The economy seems to be heading in the direction we planned. We have very good macroeconomic results, with 5.5 percent growth in gross domestic product and low inflation, and the current account deficit has been brought down," said Zoja Medvedevskiha, head of Bank of Latvia's monetary policy department.
According to the economic agreement, Latvia's budget deficit this year will not exceed 1.75 percent of GDP. Next year the fiscal deficit is planned to be below 1 percent of GDP.
Attention will be given to unjustified budget spending as well as allocating funds for payments needed for EU and NATO membership. The government will also look at cuts in social insurance payments, which it believes are too high in Latvia in comparison to international standards.
Among the macroeconomic goals are reaching the elusive 5.5 percent GDP growth per year and maintaining it while keeping inflation at no higher than 3 percent.
The government also wants to reduce the current account deficit to 6.5 percent this year, with the aim of reducing it even further.
The memorandum is to be considered in April by IMF officials.
"This is only a draft memorandum submitted to the IMF by the Ministry of Finance and the Bank of Latvia. It has not yet been signed by the IMF," said Vita Zunda, adviser to Latvia's IMF representative Adalbert Knobel.
"It is commonly believed that agreements with the IMF will bring more foreign investors to Latvia."