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Latvia’s 2011 Deficit to Be Below Target, IMF Mission Chief Says

October 11, 2011

Oct. 11 (Bloomberg) -- Latvia’s 2011 budget deficit will be below the goal of 4.5 percent of gross domestic product, said Mark Griffiths, the International Monetary Fund’s mission chief for the Baltic country.

“The good news is both sides expect the number to be below the program target for this year,” Griffiths told journalists in Riga today.

Latvia’s economy grew 5.6 percent in the second quarter, the most in 3 1/2 years, after contracting by almost a quarter since 2008 following the end of a credit-fueled real-estate bubble. The government was forced to turn to a group led by the European Union and the IMF for a 7.5 billion-euro ($10.2 billion) loan in 2008 after the second-biggest Latvian bank needed a state rescue.

“We do think it’s very important for the government to aim at a deficit of 2.5 percent of GDP next year and to meet the Maastricht criteria,” Griffiths said, referring to rules that determine whether a country is able to adopt the euro. “We need to meet this in a strong and sustainable way, not through odd measures, but through genuine, lasting measures.”

Prime Minister Valdis Dombrovskis’s Unity Party, the Zatlers’ Reform Party and the National Alliance agreed late yesterday to form a three-party government with 56 seats in the 100-member parliament that favors further austerity and adoption of the euro in 2014. Latvia plans to complete its lending program this year, and the final review mission will take place at the end of this month, according to the Finance Ministry.

The IMF has a “number of serious concerns” about the government’s decision to invest 57.6 million lati ($110.8 million) in AirBaltic AS, Griffiths said. The state owns 52.6 percent of the unprofitable airline while Baltic Aviation Systems has 47.2 percent.

“We need to make sure that public money is not wasted,” he said.

--Editors: Jennifer M. Freedman, Eddie Buckle

To contact the reporters on this story: Aaron Eglitis in Riga at; Milda Seputyte in Vilnius at

To contact the editor responsible for this story: Balazs Penz at

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