Riga: The Latvian government and the International Monetary Fund (IMF) discussed devaluation of the national currency, the lat, during negotiations on an economic assistance package, finance minister Atis Slakteris told an extraordinary session of the Latvian parliament Thursday.
But while the option had been considered during the still ongoing negotiations, devaluation had been dismissed as a viable method of tackling the economic crisis in the Baltic state, he said.
Slakteris bemoaned the fact that a downturn in Latvia’s economy, which has been booming for more than a decade, had coincided with the global credit crunch to produce a particularly dangerous situation.
“Unfortunately we have seen these falls at the same time. Latvia has never experienced such a fall as this year,” said Slakteris.
Prime minister Ivars Godmanis told parliament that spending cuts would need to be even bigger than previously anticipated, amounting to around 600 million lats (1 billion dollars) rather than the 320 million (570 million dollars) lats planned in November’s budget.
“These are serious numbers,” Godmanis said, adding that revised plans would be put to parliament on December 19.
The prime minister also defended the government’s decision of the previous evening to increase the state’s stake in troubled bank Parex to 84 per cent instead of the 51 per cent previously announced.
“The government’s decision was made to ensure the interests of depositors and enable the lifting of restrictions as soon as possible,” said Godmanis.
Experts from the IMF and European Commission had advised that a larger proportion of state ownership would make it easier to provide financial assistance to the economy of the Baltic state.
Around 60 different creditors including Japan’s Mizuho, Germany’s Commerzbank and Austria’s Raiffeisen need to agree the terms under which they will be repaid 980 million dollars’ worth of loans if Parex is to survive.
Slakteris has been authorised to speak directly to lenders of syndicated loans and attempt to win favourable repayment terms.
Opposition parties accused the government of “bankruptcy” and Solvita Aboltina, leader of the opposition New Era party made an emotional appeal for the formation of a government of national unity to win back public trust. (dpa)
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