Latvia in talks with the IMF

In a Statement released 2 days ago Latvian Finance Minister Atis Slakteris announced that Latvia will be seeking an International Monetary Fund bailout package and its will involve loans from other European governments with the aim of pegging the country’s currency with the euro.

Lawmakers at the IMF said that they expected the devaluation of the Lats, in a period where the Latvia economy is predicted to shrink 5 percent in 2009.

It is expected that without spending cuts the budget deficit may increase to 10 percent of gross domestic product.

Following in the footsteps of Ukraine, Serbia and Belarus Latvia has announced their need for help in terms of a loan for 5 billion euros.

The rescue plan which is a collaboration with the IMF, European Commission and some European governments will only reach an agreement once domestic adjustment has occurred including external financing.

The Latvian central bank announced that its reserves had fallen for two consecutive months to $4.2 billion and so the bank has bought $1.2 billion worth of its own currency after the currency weakened.

The government has increased its state in the nation’s second largest lender to 81 percent in order to stem the tide of withdrawals and increase the confidence of savers.

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