IMF Makes $170.7 Million Standby Funds Available to Latvia

The International Monetary Fund said it is making $170.7 million in standby funds available to Latvia from its 7.5 billion-euro ($10.8 billion) bailout loan, which the Baltic nation’s government doesn’t intend to use.

The availability of the funds will “provide insurance against the impact of any unforeseen deterioration in external financing conditions,” the IMF said in a statement in Washington. The Latvian government has helped to “restore confidence” and “contributed to economic recovery,” it said.

Latvia’s economy began a recovery in the second half of last year after suffering through Europe’s worst collapse during the global financial crisis. The Baltic nation plans to sell international bonds this year as it forgoes further installments of the loan it go from a group led by the IMF and the European Union.

“The government has continued to achieve substantial fiscal savings while also protecting the poorest through social safety net spending and a temporary public works jobs program, and is strengthening its active labor-market policy efforts,” the IMF said in the statement.

Latvia plans a budget deficit equal to 2.5 percent of gross domestic product next year, 1.9 percent in 2013 and 1.1 percent in 2014, according to a letter of intent that accompanied the IMF program review, the Finance Ministry said today in its statement.

Latvia is committed to meeting the criteria for adoption of the euro currency and should focus now on active labor-market policies to lower the level of unemployment, the IMF said.

To contact the reporters on this story: Aaron Eglitis in Riga at aeglitis@bloomberg.net. Kevin Costelloe at kcostelloe@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net