Latvian prime minister says IMF is "unpredictable partner"

Jan 27, 2011, 12:27 GMT

Riga - Latvia remained 'on target' to adopt the euro in 2014, Prime Minister Valdis Dombrovskis said Thursday, but described the International Monetary Fund (IMF) as an 'unpredictable partner' in ongoing budget negotiations.

Latvia is the recipient of a 7.5-billion-euro (10-billion-dollar) bailout loan from the IMF, the European Union and other lenders. The terms of that package are regarded as among the toughest devised during the global economic crisis, requiring savings equivalent to 16 per cent of gross domestic product (GDP) since 2008.

The IMF believes Latvia's 2011 budget needs to find additional savings of 50 million lats (97 million dollars) in order to keep to an agreed budget deficit of less than 6 per cent of GDP.

Dombrovskis voiced concern about the IMF's target numbers at an event hosted by the American Chamber of Commerce in Latvia.

He said the lenders had revised the deficit target to 5.4 per cent and then lowered it again.

'Unfortunately, during our discussions with the IMF and European Commission we have discovered that 6 is not 6,' he said. 'Six is not even 5.4. Currently 6 is 5.4 minus 50 million lats.'

Dombrovskis restated Latvia's hopes to adopt the euro in 2014 but acknowledged that meeting the Maastricht criterion on inflation would be difficult because it was a 'moving target.'

The inflation target changes according to a formula based on the average of the three countries with the currency bloc's lowest rates.

Dombrovskis predicted economic growth of 'at least' 3.3 per cent in 2011.

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