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With regret we must conclude that false information about the negotiations between the government and the international lenders has been systematically disseminated during the last days, as well as about the letter of intent to the International Monetary Fund (IMF) and conditions of the supplementary Memorandum of Understanding with the European Community. To prevent further spread of false statements, I consider it necessary to provide additional information about these documents.
On reduction of the budget deficit
With regard to the budget deficit, the same targets remain - 6% of GDP in 2011 and 3% of GDP in 2012. It is clearly stipulated in both documents. The consolidation volume from 700 to 800 million lats in the next two years is mentioned as a preliminary evaluation, which may vary depending on execution of the revenue share of the budget and the pace of economic recovery.
On the tax policy
With regard to taxes, no new commitments are provided in the documents. The increase in the real property tax, car tax or the VAT is mentioned only as a probability. As for the real property tax, the previous letter to the IMF envisaged the revenue increase of specific ¾ - 1% of GDP starting from the year 2011. The new letter does not contain such a quantitative condition.
The condition not to implement tax cuts does not apply to two years, but only to the year 2010. Also, the VAT increase is mentioned as a probability rather than as unconditional as it was defined in the letter to the IMF signed by the previous government.
On the pension reform
The new letter only repeats the wording of the previous letter. In cooperation with the international lenders and social partners, to work on changes to the pension system to ensure sustainability of all three levels of the pension system.
Contrary to the allegations published in the press, neither the letter of intent to the IMF, not the supplementary Memorandum of Understanding with the European Community contains a condition on increasing of the retirement age already from 2012.
In addition, the documents provide for the opportunity to redirect supplementary resources to the measures of social security network.
The letter of intent of the IMF and the Memorandum of Understanding with the European Community also provide the information about past performance and the 2010 budget adopted by the Parliament. The above documents will serve as the basis for receipt of future funds of international lenders.
I believe that now, when a significant progress has been achieved in stabilizing the country's financial system, it would be irresponsible to refuse from negotiations with international lenders and the execution of the program. Again, I would like to emphasize, that the relevant conditions of the loan (targets of the budget deficit, fiscal policy and social issues) are not changed in the prepared documents.
The international lenders review the missions headed by the IMF and the EC and will visit Latvia once every quarter. After each mission a letter of intent to the IMF will be prepared as well as supplementary Memorandum of Understanding with the European Community.
Given that the letter of intent and the Memorandum include the economic and budgetary indicators on a quarterly basis, respectively, their update is also provided on a quarterly basis.
Līga Krapāne
Press Secretary to the Prime Minister
Phone. 67082865/ 29480299
E-mail: liga.krapane@mk.gov.lv
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