IMF to allocate 195 million euros to Latvia

RIGA. August 28. KAZINFORM The International Monetary Fund has given Latvia another 195 million euros ($278 million) under a deal agreed last year to help the Baltic country cope with a severe recession, the IMF said in a statement, Kazinform refers to RIA Novosti.

The tranche is part of 7.5 billion euros ($10.8 billion) in support from international organizations led by the European Union, the World Bank and the IMF. The funds, which were to be disbursed immediately, were delayed from March due to disputes over the Latvia's budget and economic policies.

"Latvia's economy is suffering a much deeper contraction than envisaged at the launch of the program in 2008," managing director Dominique Strauss-Kahn said on Thursday.

The IMF said it had transferred 780 million euros ($1.14 billion) to Latvia since the stand-by arrangement was agreed on December 23.

After a review of Latvia's adherence to the terms of the agreement, the country will be able to increase its 2009 deficit to up to 13% of GDP, compared with the 5% previously agreed.

Last year the Latvian government proposed a program that increased VAT from 18% to 21% and cut state spending. The suggestion sparked waves of protests in the country, and the government collapsed in February.

The IMF and the EU have demanded Latvia sharply cut government spending, including on public-sector wages and state pensions, Kazinform cites RIA Novosti. See www.en.rian.ru for full version.