World Bank may reduce loan

RIGA - The World Bank is considering reducing the amount of the next part of Latvia's structural-reform loan because of problems with the implementation of several programs, said Inguna Dobraja, head of the bank's representation in Latvia.

Dobraja said that talks with the Latvian government about the structural-reform loan were ongoing and a specific decision about the amount of the next installment wasn't expected until mid-June.

Under the structural-reform program, which allows for allocation of funds according to the reform plan prepared by the government, Latvia may get three loans.

The first loan – $40.4 million – was paid to Latvia last year. Latvia's government hoped to get another installment of about $40 million.

Dobraja said that the World Bank would like to see a more flexible position in the privatization of the Latvian Shipping Company.

Government officials recently announced that two potential buyers of the Latvian Shipping Company failed to remit the $5 million deposit in preparation for an auction of the company, apparently signaling a collapse in the fourth sell-off attempt.

Dobraja said that the privatization process was a key element in the government's reform program and that the government should take great pain to ensure successful sell-offs of the remaining key state-owned industries.

In addition, she noted problems with amendments to the pension law, the law on public administration reform and other issues.

She agreed, though, that many things have turned out to be far more complicated than had initially been expected.

But Dobraja said cooperation between the Latvian government and the World Bank should be evaluated as successful, noting that she hoped progress would "take the right direction," Dobraja said.

Dobraja agreed that a reduction in the second loan would hurt Latvia financially and send a message to international investors.