The Nordic Finance Ministers have issued a Christmas statement to the beleaguered Latvian Government, promising supplementary credits. Here is the 23 December 2008 joint statement:
Joint statement from the Ministers of Finance in Denmark, Finland, Norway and Sweden regarding lending to Latvia
The IMF Executive Board has today approved a financial package for Latvia. The package is linked to an extraordinary strong economic reform programme that includes a fiscal consolidation of around 7 percent of GDP already in 2009. The Nordic countries stand ready to provide credits of up to €1.8 billion contingent on the successful implementation of the reform programme.
Like in the case of Iceland, the Nordic countries - Denmark, Finland, Norway and Sweden - have worked closely together and jointly decided to contribute to the financing of the IMF-programme. The total amount the Nordic countries are prepared to lend equals the support provided for Iceland 1.8 billion euro.
The programme is very ambitious and shows that Latvia is firmly committed to stick to the present currency peg. It will be particularly important to rebalance the current account and improve the economy’s external competitiveness through the full implementation of the fiscal plans and ensuring that wages develop in line with the requirements that come with the fixed exchange rate. The authorities also need to work hard with structural reforms aiming at developing a competitive export sector and improving the institutional framework of the economy.
With the implementation of the programme Latvia should be in a position to weather the present turbulence and move towards a path of sustainable growth and more balanced macroeconomic developments.
Anders Borg, Kristin Halvorsen, Jyrki Katainen and Lars Løkke Rasmussen
Despite the IMF rescue package and coordinated help from the Nordic countries, Latvia faces a rough 2009 and beyond.