IMF expresses concerned about airBaltic rescue plan

Victoria
By Victoria October 12, 2011 14:11

IMF expresses concerned about airBaltic rescue plan

The International Monetary Fund (IMF), which together with the European Union bailed out Latvia to the tune of €7.5 billion in 2008, revealed that it had not been consulted about Latvia’s plans to inject 16 million lats ($30.9 million) of public money to rescue airBaltic. To be able to fund the airBaltic bail out, the Latvia government will need to adjust its 2011 budget to find the money, However under the terms of the 2008 agreement with the IMF and the EU, Latvia is required to notify them of any changes to their budget targets.

Upon hearing the news, Mark Griffiths, head of an IMF mission visiting Latvia, said the IMF had a “number of serious concerns…about injecting public money when there are no clear accounts”. Griffiths said that the IMF needs to make sure that public money is not wasted.

The rescue deal also allows for 14 million lats to be injected into airBaltic’s minority private shareholder, Baltic Aviation Systems (BAS), and the airline’s share capital could later be increased up to 100 million lats by both shareholders.

The IMF wants to make sure that if the rescue plan does go ahead that the government will make “additional budget measures to compensate for the cost”. Latvia is already committed to cutting its budget deficit to 4.5% of gross domestic product this year and to 2.5% next year. Although additional budget cuts will be painful for the country, the government says it has to help the airline, which contributes 1.5-2.5% to Latvia’s gross domestic product.

Victoria
By Victoria October 12, 2011 14:11
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