World Bank delays Latvian loan installment

RIGA - The World Bank has delayed payment to Latvia of the second installment of a structural adjustment loan which the government had hoped would be released next month.

Jos Verbeek, the World Bank's project manager, said November would now be a realistic date for payment of the $40 million installment, which would be used to pay off loans provided on less favorable terms by the G24 group of nations in the early 1990s.

He cited the slow pace of economic and administrative reform as the reason for the delay. "The government probably misjudged how much effort would be required," he said.

Roberts Zile, the minister for cooperation with international financial agencies, said the bank had raised particular concerns about three areas: pension reform, administrative reform and privatization. Latvia's preparations for European Union membership would not be blown off course, he said. "We had hoped for the money in June. But this won't affect EU accession."

The World Bank expects Latvia to reduce the number of people who can retire early on state pensions, said Zile. Changes are also needed to allow those who work beyond the retirement age to simultaneously receive pensions.

Public sector administration must also be reformed, particularly to combat corruption. The most publicized stumbling block is privatization, particularly the sale of a majority share in the Latvian Shipping Company, as well as the state's remaining shares in the oil company Ventspils Nafta and the gas company Latvijas Gaze.

Zile gave little cheer to those, including the World Bank and the Latvian Privatization Agency, who would like to see an extension of last month's deadline by which bidders for the Latvian Shipping Company were to submit a $5 million security deposit.

Two companies, d'Amico of Italy and FAL of Saudi Arabia, were accepted as potential bidders by the Latvian Privatization Agency, but neither paid the deposit. "The agency is entitled to request an extension to the deadline, but Aigars Kalvitis, (minister of economy) does not support the idea," said Zile.

The Latvian Privatization Agency submitted a request for an extension of the deadline to the Cabinet on May 25. Failing that, it is drawing up new regulations which would allow the company to be sold to a non-strategic investor, an idea opposed by the World Bank.

Verbeek said the bank has asked the government to show "leniency" to the existing bidders.

"For the first time there are two reputable companies on the doorstep. The process has worked well so far. I think it's just a question of competition between the two. They are taking a careful look at each other."