Are you sure?

Latvia seeks €1-3 bln from IMF/EU-ministry

Latvia is seeking €1 billion to €3 billion ($1.3-3.90 billion) from the International Monetary Fund and European Commission, with final sums depending on an economic plan under negotiation, the Finance Ministry said.

Latvia became the second European Union state after Hungary to turn to the IMF for help after its economy slid into recession, the budget deficit began to spiral higher and it had to take over its second-largest bank.

“The Finance Minister (Atis Slakteris) has indicatively said that the sum could be between €1 billion and €3 billion,” said Finance Ministry spokeswoman Diana Berzina.

She stressed that in the talks with the Fund which had taken place so far no concrete sum had been mentioned.

She said the actual amount would depend on economic measures which would be the result of talks between Latvia and the IMF.

Prime Minister Ivars Godmanis told commercial LNT television that the sum could be known after Monday, when Latvia will have presented to the Fund its ideas on the scale of an expected economic decline next year and on its policy response.

The government said on Tuesday it was now forecasting a GDP decline of 4.3% next year, compared with a 2% drop forecast in the current 2009 budget. “There are no particular conditions (for the loan),” Godmanis said.

The government and central bank denied on Tuesday the IMF wanted a change in the lat currency peg to the euro, which would likely lead to an effective devaluation, in exchange for a loan.

The lat is pegged at a central rate of €0.7028, with a 1% fluctuation band. The currency has been stuck for eight weeks at the weak end of the bank, 0.7098, with the central bank spending more than €800 million to support it. (Reuters)