The government also said it would sell its shares in five state-owned companies in exchange for the vouchers, a measure which would enable the use of remaining vouchers.
Privatization vouchers were issued in the early 1990s to enable citizens to purchase their apartments and shares in state-owned companies. Shares in the state-owned Latvian Shipping Company, Lattelekom, oil terminal Ventspils Nafta, gas utility Latvijas Gaze and the savings bank Latvijas Krajbanka will also be sold for privatization certificates.
Latvian Privatization Agency Director General Janis Naglis called the decision to extend the validity of the vouchers "the best possible option that the Cabinet could chose in the given situation."
Whether people will actually be able to use their vouchers to buy shares in unprivatized or partly privatized companies remains to be seen. The government will have to decide separately on the privatization of each of these companies, added Naglis.
The extension of the vouchers' validity has yet to be approved by Parliament.
Privatization vouchers are currently set to expire at the end of this year, but about 16 percent of the vouchers originally issued have not yet been used.
Latvian Economy Minister Aigars Kalvitis told reporters details of future privatizations would be announced in due course.
He said that conditions for exchanging shares in Latvijas Gaze for vouchers had improved after a recent auction at which large shareholders appeared to have achieved their ownership goals and the share price was relatively low.
The state currently holds a 3 percent stake in Latvijas Gaze, which could be sold in the next few months. It intends to retain 2 shares in the utility. The 32 percent stake in Latvijas Krajbanka which the state still holds may be privatized by the end of next year. But this stake could be reduced if the state does not participate in an expected increase in registered capital.
How privatization of the Latvian Shipping Company, Ventspils Nafta and Lattelekom will proceed is harder to predict.
The Latvian Shipping Company is completely state-owned and the state has been trying to sell a controlling stake to a strategic investor for several years.
Ventspils Nafta meanwhile is 43.62 percent state-owned. It is possible that none of these shares will be put up for public sale. Lattelekom is 51 percent state-owned, but it remains unclear when this stake may be sold, or what proportion of shares may be exchanged for vouchers.
The government earlier presented several proposals on the future of vouchers, ranging from annulling them at the end of this year to extending their validity indefinitely.
Legal experts said that under the relevant legislation the state could only restrict the validity of vouchers once there had been an opportunity to exchange all of them.
The two year extension in the validity of property compensation certificates reflects the longer time the privatization of state and municipal land and apartments is expected to take.