PM says convinced Latvia will get more IMF, EU aid

RIGA, June 15 - Latvia's prime minister said on Monday he was sure his country would get further loans from the International Monetary Fund (IMF) and European Union (EU), which are vital to avoid state bankruptcy.

He said the IMF was still looking at the country's new budget plans and would gives its answer in the next day or so.

Latvia is in the grip of its worst post-Soviet economic crisis, with the economy forecast to drop close to 20 percent this year. The crisis has led to speculation Latvia will have to devalue and end the peg of its lat currency to the euro.

The government late on Sunday approved changes to the 2009 budget aimed at providing cuts of 500 million lats ($1.01 billion). The measures include a 10 percent reduction in pensions and a further 20 percent cut in public sector salaries.

"Of course we are working on getting this loan and I am sure that we will get it," Prime Minister Valdis Dombrovskis told public LTV television. He has earlier said he hoped the funds will arrive later this month or in early July.

He said the alternative was even harsher budget cuts as Latvia would have to balance its budget as other sources of loans were not available.

"The IMF is still looking at this proposal (the amended budget). In the next day or so it will come out with its conclusion," he added.

After the cabinet meeting on Sunday, Baltic news agency BNS quoted Finance Minister Einars Repse was quoted as saying that even with the budget cuts the budget deficit this year could be between 10 and 11.6 percent of gross domestic product (GDP).

This is double the 5 percent of GDP deficit Latvia agreed to when it secured a 7.5 billion euro ($10.55 billion) rescue loan last year from the IMF and EU.

Parliament is due to vote on the revised bill on Tuesday.