An IMF mission visited Latvia for the first post-programme monitoring discussions — part of the IMF's regular surveillance of countries with IMF credit outstanding above 200 per cent of quota. The mission cooperated closely with an EC mission that visited for post-programme surveillance discussions.
IMF mission chief, Mark Griffiths, issued the following statement: “This year’s budget deficit should fall to around 2 per cent of GDP, well below the 3 per cent Maastricht criterion. Tax revenues in the first quarter of 2012 came in above plan. Given the strength of domestic demand, the bulk of this over performance should be saved. However, some additional spending in areas that have adjusted the most and where funding in the 2012 budget was limited—primary health care, road maintenance, and the social safety net—could be warranted. Public sector wages need to be made more competitive with the private sector, to stem the loss of highly qualified staff and to recruit staff needed to strengthen tax administration. But any spending increases would need to be limited and well-targeted.“
“The authorities are implementing their structural reform agenda. The Fiscal Responsibility Law is being aligned with the Fiscal Compact, but more work is needed on the methodology for computing the structural fiscal balance. On Mortgage and Land Bank (MLB), the authorities should sell all commercial assets unless there is clear evidence that the bids are well below market value. Once the sales process is completed, the remaining development part of MLB should be merged with other development finance institutions, to create a single development financial institution, and the banking license removed.“
Press release
© International Monetary Fund
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