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Republic of Latvia: First Review and Financing Assurances Review Under the Stand-By Arrangement, Requests for Waivers of Nonobservance of Performance Criteria, and Rephasing of Purchases Under the Arrangement—Informational Annex

Author(s):
International Monetary Fund
Published Date:
September 2009
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Appendix I. Latvia: Fund Relations

(As of July 29, 2009)

I. Membership Status: Joined May 19, 1992; Article VIII.

II. General Resources Account:

SDR MillionPercent of Quota
Quota126.80100.0
Fund holdings of currency662.11522.17
Reserve position in Fund0.060.04

III. SDR Department:

SDR MillionPercent of Allocation
Holdings0.41N.A.

IV. Outstanding Purchases and Loans:

SDR MillionPercent of Quota
Standby Arrangement535.34422.20

V. Latest Financial Arrangements:

TypeApproval DateExpiration DateAmount Approved (SDR million)Amount Drawn (SDR million)
Stand-by12/23/0803/22/111,521.63535.34
Stand-by04/20/0112/19/0233.00.00
Stand-by12/10/994/9/0133.00.00
Stand-by10/10/974/9/9933.00.00

VI. Projected Obligations to the Fund:

20092010201120122013
Principal0.000.00267.67267.670.00
Charges/interest3.957.876.863.070.15
Total3.957.87274.53270.740.15

Exchange Arrangements:

The currency of Latvia is the lats, which was introduced in March 1993 to replace the Latvian ruble. The exchange rate was pegged to the SDR from February 1994 to December 2004, within a ±1 percent band. On January 1, 2005, the lats was repegged to the euro at the rate € 1 = 0.702804 lats, and on April 29, 2005, Latvia entered ERM2, maintaining the previous band width. On July 29, 2009 the lats was equal to US$ 2.03. Latvia’s exchange system is free of restrictions on the making of payments and transfers for current international transactions. Latvia maintains security-related exchange restrictions pursuant to UN Security Council resolutions and EC Council regulations, which have been notified to the Fund under Decision No. 144-(52/51), adopted August 14, 1952. Latvia also maintains a partial deposit freeze on Parex Bank, which gives rise to an exchange restriction. However, as it has been imposed for balance of payments reasons, is temporary and is nondiscriminatory, the board has approved its retention until end-November 2009 or the conclusion of the next Article IV, whichever comes earlier.

Article IV Consultation:

Latvia is on the 24-month consultation cycle.

The 2006 Article IV staff report was issued on September 13, 2006 (Country Report No. 06/353). The last Article IV Board discussion took place on October 4, 2006. The Public Information Notice No. 06/113 was released on October 12, 2006.

Safeguards Assessment

A safeguards assessment of the Bank of Latvia was conducted in October 2001 and an update assessment was concluded on July 8, 2009. The update assessment confirmed that the BoL has a relatively strong safeguards framework in place. Recommendations for further improvements were made in the legal structure and independence, financial reporting, and internal control areas.

FSAP Participation and ROSCs:

A joint World Bank-International Monetary Fund mission conducted an assessment of Latvia’s financial sector as part of the Financial Sector Assessment Program (FSAP) during February 14–28, 2001. The Financial Sector Stability Assessment (FSSA) report was discussed at the Board on January 18, 2002, together with the 2001 Article IV staff report (Country Report No. 02/10). An AML/CFT assessment mission took place during March 8–24, 2006, and the report was sent to the Board on May 23, 2007. A joint IMF-World Bank mission conducted an FSAP Update during February 27-March 9, 2007.

ROSC Modules
Standard/Code assessedIssue date
Code of Good Practices on Fiscal TransparencyMarch 29, 2001
Code of Good Practices on Transparency in Monetary and FinancialJanuary 2, 2002
Policies
Basel Core Principles for Effective Banking SupervisionJanuary 2, 2002
CPSS Core Principles for Systemically Important Payment SystemsJanuary 2, 2002
IOSCO Objectives and Principles of Securities RegulationJanuary 2, 2002
IAIS Core PrinciplesJanuary 2, 2002
OECD Corporate Governance PrinciplesJanuary 2, 2002
Data ModuleJune 23, 2004
Technical Assistance (2004–09):
DEPTProjectActionTimingCounterpart
FADBudget ReformsMissionJanuary 2004Ministry of Finance
FADExpenditure PolicyMissionJune 2007Ministry of Finance
FADTax PolicyMissionMarch 2008Ministry of Finance
FADRevenue AdministrationMissionJanuary 2009Ministry of Finance
MCMBank ResolutionMissionJanuary 2009FCMC, Bank of Latvia
FADPublic Financial ManagementMissionMarch 2009Ministry of Finance
MCM/LEGDebt restructuringMissionMarch 2009Ministry of Finance, FCMC
LEGLegal Aspects of P&A TransactionsMissionFeb-March 2009FCMC
MCMBank Intervention procedures and P&AMissionMarch 2009FCMC
FADPublic Financial ManagementMissionApril-May 2009Ministry of Finance
FADRevenue AdministrationMissionJuly 2009Ministry of Finance
FADCash ManagementMissionJuly-August 2009Ministry of Finance

Resident Representative:

Mr. David Moore has been appointed Resident Representative effective from June 11, 2009.

Fourth Amendment:

Latvia accepted the Fourth Amendment of the Articles of Agreement on February 16, 2001.

Appendix II. Latvia: World Bank Relations

(As of July 29, 2009)

Table 1.Latvia: Bank and Fund planned activities in macro-critical structural reform areas, July 2009–June 2010
TitleProductsProvisional Timing of MissionsExpected Delivery Date
1. Bank Work ProgramRegional Framework PaperIn preparationExpected in the Fall 2009
Social Sector, Public Administration Reform and Emergency Safety Net–Development Policy LoanIn preparationBoard approval expected in September 2009
Financial Sector–Development Policy LoanIn preparationBoard approval expected in September 2009
Swiss Cohesion Fund TAUnder discussionImplementation throughout fiscal year 2010
2. Fund Work ProgramTA on cash managementAugust 2009August 2009
TA on refocusing the Mortgage and Land BankAugust/September 2009September 2009
Staff Visit (Fiscal)September 2009September 2009

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