Chapter

LATVIA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2000
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Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: June 10, 1994.
Exchange Arrangement
CurrencyThe currency of Latvia is the Latvian lats.
Exchange rate structureUnitary.
Classification
Conventional pegged arrangementThe lats is pegged to the SDR and, since February 1994, has maintained a constant exchange rate against the SDR of LVL 0.7997 per SDR 1. The Bank of Latvia (BOL) quotes fixing rates of the lats against 46 convertible currencies daily. These rates are used for accounting purposes and are valid through the next day. The BOL also quotes real-time buying and selling rates for the currencies in the SDR basket (i.e., dollars, euros, pounds sterling, and yen). The spread between the buying and selling rate is 2%.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketYes.
Arrangements for Payments and Receipts
Prescription of currency requirementsNo.
Payment arrangements
Bilateral payment arrangements
InoperativeInoperative bilateral payment agreements are maintained with Azerbaijan and Kazakhstan.
Administration of controlGovernment decisions adopted by the cabinet of ministers and approved by parliament prevail in foreign exchange and trade matters, but the authority to issue regulations governing foreign exchange transactions has been delegated to the BOL. All foreign exchange transactions must be effected through authorized banks and enterprises licensed by the BOL.
International security restrictionsNo.
Payment arrearsNo.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeA license is required.
Controls on exports and imports of banknotesNo.
Resident Accounts
Foreign exchange accounts permittedResident natural persons and enterprises are allowed to hold foreign currencies in domestic or foreign bank accounts and to use these funds for domestic payments.
Held domesticallyYes.
Held abroadYes.
Accounts in domestic currency convertible into foreign currencyYes.
Nonresident Accounts
Foreign exchange accounts permittedNonresident natural persons and enterprises are permitted to hold bank accounts in Latvia denominated in either foreign or domestic currency.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measures
Negative listThere are virtually no licensing requirements for imports except for reasons of health and safety. Licensing is almost automatic except for pyrotechnic products, arms and ammunition, combat vehicles, and prepared explosives. The processing time for license applications is no more than 10 business days, and license fees reflect processing costs only.
Import taxes and/or tariffsAccording to the Law on Customs Duty (Tariffs), there are three specific tariffs on sugar and cigarettes. The average of the basic ad valorem tariffs on nonagricultural goods is 2.46%, with 1% being the most common tariff rate. Some final goods are exempt from customs duties. The average basic rate on agricultural goods is 12.71%, and the average MFN rate is 9.20%.



On April 1, 2000, parliament abolished fixed tariff rates on alcoholic beverages and abolished tariff rates on cyclic and acyclic hydrocarbons; paper, paperboard, paper pulp, and articles made of paper; iron and steel and articles made thereof; and electrical machinery.



Latvia maintains trade and economic cooperation agreements providing for MFN status with the following countries: Armenia, Azerbaijan, Belarus, China, Kazakhstan, the Kyrgyz Republic, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine (for agricultural goods), and Uzbekistan. Latvia has free-trade agreements with a total of 27 WTO countries. These are the other Baltic countries, the European Union, the EFTA, the Czech Republic, Hungary, Poland, the Slovak Republic, Slovenia, and Ukraine (for industrial goods).
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsNo.
Export licensesNo.
Export taxesAll remaining export duties, except on books more than 50 years old and antiques, were removed on January 1, 1999.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital and money market instrumentsNo.
Controls on derivatives and other instrumentsNo.
Controls on credit operationsNo.
Controls on direct investment
Inward direct investmentNonresidents are not allowed to hold more than 49% of shares in companies operating in securities.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase locally by nonresidentsThe purchase of buildings is permitted. The purchase of land is not restricted, except for areas of land near borders and environmentally protected areas. Land to be used for agricultural and forestry purposes may be bought only if one-half of the paid share capital of the company belongs (1) to citizens of Latvia or to citizens of countries with which Latvia has an agreement on promotion of foreign investment; (2) to a group of the previous categories; or (3) it is a public joint-stock company, shares of which are quoted on the stock exchange.
Controls on personal capital movementsn.a.
Provisions specific to commercial banks and other credit institutions
Lending to nonresidents (financial or commercial credits)Exposure (including lending) to any Zone B country must not exceed 25% of a bank’s capital. Total exposure to Zone B countries must not exceed 200% of a bank’s capital.
Open foreign exchange position limitsThe open foreign currency position is limited to 10% of capital for any single foreign currency and 20% of capital for all foreign currencies.
On resident assets and liabilitiesYes.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investorsPrivate pension funds are not allowed to invest abroad more than 15% of their pension capital. The law on insurance companies and their supervision restricts investments abroad by the insurance companies to 10% of their technical resources, except when authorization is granted.
Limits (max.) on securities issued by nonresidents and on portfolio invested abroadYes.
Limits (max.) on portfolio invested abroadYes.
Other controls imposed by securities lawsNo.
Changes During 1999
Exports and export proceedsJanuary 1. All remaining export duties, except those on books more than 50 years old and antiques, were removed.
Capital transactions
Controls on direct investmentOctober 4. The foreign investment law was amended to allow foreign ownership in excess of 49% in radio and television.



November 11. Nonresidents were allowed to invest more than 49% in companies operating in gambling and lotteries.
Changes During 2000
Imports and import paymentsApril 1. Fixed tariff rates on alcoholic beverages and tariff rates on a range of products were abolished.
Capital transactions
Controls on direct investmentFebruary 24. Foreign ownership in companies engaged in logging was allowed.

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