IMF Completes Third Review Under Stand-By Arrangement with Latvia and Approves €105.8 Million Disbursement

Published: 22 July 2010 y., Thursday

Pinigai
The Executive Board of the International Monetary Fund (IMF) today completed the third review of Latvia's performance under an economic program supported by a Stand-By Arrangement (SBA). The Board also completed the financing assurances review under the SBA. The Board decision makes available an amount equivalent to SDR 90 million (about €105.8 million or US$135.6 million), bringing total disbursements under the SBA to SDR 982.24 million (about €1.15 billion or US$1.48 billion). The Executive Board also completed the financing assurances review under the SBA and approved a request to waive the applicability of the end-June 2010 performance criterion on the fiscal balance, as data on this criterion were not yet available.

The Board today concluded the 2010 annual Article IV consultation as well, and a Public Information Notice will be released on this in due course.

Strong policy actions under the SBA have helped stabilize the economy, restore confidence, and limit spillovers from financial market turbulence elsewhere in Europe. While achieving substantial fiscal savings, the government has also sought to protect the poorest, by increasing social safety net spending beyond amounts in the 2010 budget, to finance active labor market policies and temporary jobs programs. Looking ahead, the government has committed to steps to support a recovery in growth and continue progress toward euro adoption, which include:

• adhering to the 2010 budget, identifying a menu of options for the 2011 budget that will put the deficit on a declining path consistent with meeting the Maastricht criteria and adopting the euro in 2014, and developing a new Fiscal Responsibility Law to help maintain budget discipline,

• strengthening the financial sector, including by developing a transformation plan for Mortgage and Land Bank, and

• removing tax and legal impediments to private debt restructuring, so that credit can help support a return to growth.

The SBA, which was approved on December 23, 2008 (see Press Release No. 08/345) for an amount equivalent to SDR 1.52 billion (about €1.79 billion, or US$2.29 billion), entails exceptional access to IMF resources, amounting to 1,200 percent of Latvia's quota in the IMF. The IMF’s support is part of a coordinated effort with the European Union, Nordic governments, the World Bank, and other bilateral creditors that are providing the financing necessary to ensure that essential public services, especially support to those most severely hit by the crisis, can be maintained in the face of the sharp drop in government revenues.

Following the Executive Board's discussion on Latvia, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, stated:

“The Latvian authorities’ fiscal and financial sector reforms have helped stabilize the economy and insulate it from recent international financial market turmoil. Exports and industrial production are rebounding strongly. To support more rapid growth and to put euro adoption within reach, it will be important to ensure sustained fiscal adjustment, reduce unemployment, improve competitiveness through structural reforms, and restore the financial sector to health.

”Considerable fiscal adjustment is still needed to preserve debt sustainability and lower the deficit in line with the Maastricht criteria. The authorities’ program focuses on identifying high-quality fiscal measures and spending cuts that will last, including by re-examining areas where spending increased significantly in the past, and on improving control over state-owned enterprises. Given remaining adjustment needs, the authorities’ medium-term tax strategy, which identifies possible revenue measures, is welcome.

“Competitiveness has improved significantly. Additional wage and price adjustment, together with structural reforms, would help close any remaining competitiveness gap, further enhance confidence in the quasi-currency board exchange rate regime, and boost growth by reorienting the economy toward the export sector.

”The authorities have taken steps to strengthen financial sector regulation and supervision, bank resolution procedures, credit and liquidity risk management rules, and emergency liquidity support. Plans to restructure two state-owned banks are also advancing. Given high levels of private sector indebtedness, measures are being taken to streamline insolvency and foreclosure procedures and review tax disincentives. These steps should encourage debt restructuring, stimulate new lending, and restore economic growth.“

Šaltinis: imf.org
Copying, publishing, announcing any information from the News.lt portal without written permission of News.lt editorial office is prohibited.

Facebook Comments

New comment


Captcha

Associated articles

The most popular articles

Taking stock of the single market

Most EU countries continue to meet deadlines for incorporating single market rules into national law, contributing to economic growth and job creation. more »

Japan debuts new bullet train

Japanese officials unveil their new bullet train, capable of travelling at speeds of 320 km per hour (198 miles per hour). more »

The Security Technology Exhibition KIPS 2011 to be Held in Kiev

The first International Security Technology Exhibition, KIPS 2011, will be held on 23-26 February 2011 in Kiev (Ukraine). The motto of the exhibition is ‘There can never be too much security!’ more »

Dubai dining reaches new heights

The world's highest restaurant opens in Dubai, United Arab Emirates, located 400 metres above ground in Burj Khalifa, the world's tallest tower. more »

Clarifying rules to strengthen consumer rights

The rights of consumers will be clarified and updated, whether they shop at a local store or buy goods on line, under new EU rules as amended by the Internal Market Committee on Tuesday. more »

Fiji and Papua New Guinea: green light for economic agreement

MEPs on Wednesday gave their green light for the Council to conclude an Interim Economic Partnership Agreement with Papua New Guinea and Fiji, two countries of the Pacific Region with significant exports to the EU. more »

Setting the stage for economic recovery

Report sets 10 priorities for tackling the bloc's main economic challenges, launching the first ever ‘European semester'. more »

Capsule rooms appear in Shanghai

China's first capsule hotel ready to open its doors in Shanghai, aims to capture slice of booming leisure budget travel market. more »

A turning point for the European financial sector

Declaration by Michel Barnier on the start of three new authorities for supervision. more »

A successful start for the euro changeover in Estonia

On 1 January, Estonia adopted the euro as its official currency and the changeover is running smoothly and according to plan. more »