No plan to ask for extra billion euros, says Latvian prime minister
Latvian Prime Minister Valdis Dombrovskis said Monday his government did not intend to approach international lenders for an additional 1 billion euros (1.35 billion dollars) on top of an existing 7.5-billion assistance package, as reported by some media, dpa reported.
"Is Latvia's government requesting an additional billion? The answer is no," he said during a press briefing.
However, Dombrovskis stopped short of ruling out such action in future.
"One could theoretically argue that given the pretty harsh economic situation there could be a possibility that Latvia would need some more international loans, and one cannot exclude that," he said.
"If we come to the conclusion that we will definitely need additional funds we will open negotiations. Currently we are not requesting any additional loan," he said.
IMF representatives are currently in the Baltic state to discuss implementation of a hard-hitting package of austerity measures including public sector wage cuts and structural reforms that Latvia must enact in order to receive the bailout cash.
In December 2008, the government of previous prime minister Ivars Godmanis secured a 7.5-billion-euro economic bailout package from the International Monetary Fund, World Bank, European Union and other international bodies that depended upon Latvia limiting its 2009 budget deficit to around 5 per cent of gross domestic product (GDP).
But the economic situation in Latvia, which joined the EU and NATO in 2004, has deteriorated sharply since then and the new government under Dombrovskis believes that it would be impossible to stick to the 5 per cent limit.
Latvian GDP is predicted to fall by 12 per cent during 2009, according to official estimates. Independent analysts say the economy could contract by as much as 20 per cent.
But by sticking to the general aims of the IMF package, Latvia could remain on track to adopt the euro as its currency on January 1, 2012, Dombrovskis reaffirmed, though he admitted things are likely to get worse before they get better for the average Latvian.
"The toughest period will be round the next budget amendments. Right now we are discussing the exact schedule but certainly it will include quite severe budget cuts on top of what has already been done," he told Deutsche Presse-Agentur dpa.
"We really do not have much choice. The second option is to go bankrupt," Dombrovskis said.