IMF Survey: IMF Set to Lend $2.4 Billion to Latvia

IMF News, December 19, 2008

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Alleviate immediate liquidity pressures.
Restore long-term stability.
Enhance competitiveness.
Centered on maintaining the current exchange rate peg, which "calls for extraordinarily strong domestic policies, with the support of a broad political and social consensus."

Announcement made against a backdrop of a worsening economy.
IMF global growth forecast revision: cut by ¾ percentage point to 2.2 percent for 2009.
Recent IMF lending to other countries: new loans worth a total of $40 billion approved for Ukraine, Iceland, Pakistan, and Hungary.

Financial sector measures to stabilize the sector and restore depositor confidence.
Substantial tightening of fiscal policy:
- Government aim: headline fiscal deficit of less that 5 percent of GDP in 2009 (compared with a deficit of 12 percent of GDP if no new measures were taken).
Structural reforms and wage reductions, led by the public sector, to strengthen competitiveness and facilitate external adjustment.
Social protection: IMF supports the protection of social spending embedded in the program.
Exceptional access: Level of access equivalent to around 1,200 percent of Latvia's quota in the IMF.

Total multilateral and bilateral package: €7.5 billion ($10.5 billion).
EU contribution: €3.1 billion ($4.3 billion).
World Bank contribution: €400 million ($557.6 million).
Additional contributions from several bilateral creditors, including Denmark, Estonia, Norway, and Sweden.

IMF Managing Director Dominique Strauss-Kahn: emphasized the need for "extraordinarily strong domestic policies" and noted the justification for "the exceptional level of access to Fund resources."
IMF commitment: "We will continue assisting the Latvian authorities in their courageous efforts to adjust in the midst of the global financial turmoil and we will work closely with them and other stakeholders as the program unfolds."

IMF Survey online — December 19, 2008