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Post-Programme Surveillance for Latvia

The EU balance-of-payments assistance programme to Latvia was agreed in December 2008: Multilateral financial assistance of €7.5 billion was committed of which €4.5 billion were eventually paid out. The programme expired on 19 January 2012.

From 20 January 2012 to 16 January 2015 Latvia was subject to post-programme surveillance (PPS). The PPS has expired, as Latvia has repaid 75% of the EU loan. In March 2014, Latvia repaid the first tranche of €1 billion and the second tranche of €1.2 billion was repaid on 16 January 2015.

Overview of disbursements

The EU financial assistance was eventually disbursed in four instalments for a total of €2.9 billion, instead of the six instalments and €3.1 billion initially scheduled:

  • €1.0 billion, released 25 February 2009 following signature of the Memorandum of Understanding;
  • €1.2 billion, released 27 July 2009;
  • €0.5 billion, released 11 March 2010;
  • €0.2 billion, released 21 October 2010;

The average interest rate on the amounts disbursed by the European Commission is around 3.2%, with repayments starting in 2014. In total, about €4.5 billion out of the €7.5 billion committed have been paid out.

The balance-of-payments programme for Latvia

In light of a rapidly deteriorating economic situation and concerns related to the health of the banking sector, the Latvian authorities applied in late 2008 to the EU, IMF and regional neighbours for financial assistance. The financial assistance package was provided subject to a strong commitment from the Latvian authorities to implement an ambitious fiscal, financial system and structural reform programme to facilitate the necessary external and internal adjustments, to stabilise the economy and to restore economic policy credibility.

Following multilateral negotiations in December 2008, an agreement was reached to provide multilateral financial assistance to Latvia with an overall amount of €7.5 billion, consisting of the following contributions:

  • European Community, €3.1billion under a balance-of-payments assistance programme
  • International Monetary Fund, SDR 1.5 billion (around €1.7 billion) under an IMF Stand-by arrangement approved on 23 December 2008, amounting to about 1,200 percent of Latvia's quota;
  • Nordic countries (Sweden, Denmark, Finland, Norway and Estonia), €1.9 billion;
  • the World Bank, €0.4 billion;
  • the European Bank for Reconstruction and Development, the Czech Republic and Poland, €0.4 billion.

The Community financial assistance was to be made available during a period of three years from the day of the entry into force of the Council decision on providing Community medium-term financial assistance for Latvia.

On 21 December 2011 the fifth and last Supplemental Memorandum of Understanding (SMoU) related to the EU financial assistance to Latvia was signed by the then Commission's Vice President Olli Rehn and the Latvian authorities. This followed a positive assessment by the Commission of the implementation of the adjustment programme. The signature of the SMoU was the concluding step under the programme, which officially expired on 19 January 2012.

Key documents

Chronology of the balance-of-payments assistance programme in Latvia

2014

14 November: Sixth Post-Programme Surveillance mission to Latvia by the Commission services

10 April: Fifth Post-Programme Surveillance mission to Latvia by the Commission services

2013

8 Nov: Fourth Post-Programme Surveillance mission to Latvia by the Commission services

16 May: Third Post-Programme Surveillance mission to Latvia by the Commission services

2012

26 November: The Commission statement at the conclusion of the second post programme surveillance visit to latviapdf(20 kB) Choose translations of the previous link .

1 March: European Commission (DG ECFIN) and the Bank of Latvia Seminar: EU Balance-of-Payments assistance for Latvia: foundations of success.

19 January: Latvia completes the EU balance-of-payments financial assistance programme. The post-programme surveillance will run until a large part of the EU-funded loans will be repaid.

2011

21 December: Signature of the fifth Supplemental Memorandum of Understanding (SMoU) related to the EU financial assistance to Latvia

8 December: Statement by the EC and the IMF on the Review Mission to Latvia Choose translations of the previous link 

21 November: The Commission has given a positive reply to Latvia's request for the release of EUR 100 million from the subaccount at the Bank of Latvia earmarked for banking sector support to be used for financing general government needs. This follows fulfillment of underlying conditions, as specified in the fourth SMoU.

22 June: The Commission has given a positive reply to Latvia's request for the release of EUR 300 million from the subaccount at the Bank of Latvia earmarked for banking sector support to be used for financing general government needs. This follows fulfillment of underlying conditions, as specified in the fourth SMoU.

8 June: Signature of the fourth Supplemental Memorandum of Understanding (SMoU) related to the EU financial assistance to Latvia Choose translations of the previous link 

15 April: Statement by the EC and IMF on the Review Mission to Latvia Choose translations of the previous link 

2010

16 December: Joint statement at the conclusion of a joint IMF and European Commission staff visit to Latvia

21 October: Commission makes a €0.2 billion disbursement as part of the Balance of Payments support to Latvia Choose translations of the previous link 

20 July: Signing of the Third Supplemental Memorandum of Understanding

25 May – 7 June: Commission and IMF joint review mission to Latvia, see concluding statement Choose translations of the previous link 

11 March: Disbursement of the third instalment (€ 0.5 billion) Choose translations of the previous link 

22 February: Signing of the Second Supplemental Memorandum of Understanding

27 January: Statement by Commissioner Almunia on Latvia Choose translations of the previous link 

2009

27 July: Disbursement of the second instalment (€ 1.2 billion) Choose translations of the previous link 

13 July: Signing of the First Supplemental Memorandum of Understanding

13 July: Council adopts Decision 2009/592/EC amending Council Decision 2009/290/EC providing Community medium-term financial assistance for Latvia

2 July: Commission decides to release second loan instalment Choose translations of the previous link 

27 May – 17 June: Commission and IMF joint review mission to Latvia Choose translations of the previous link 

25 February: Disbursement of the first instalment (€ 1.0 billion) Choose translations of the previous link 

26-28 January: Signing of the Memorandum of Understandingpdf(139 kB) Choose translations of the previous link 

20 January: Council adopts Decision 2009/289/EC on granting mutual assistance for Latvia and Council Decision 2009/290/EC providing Community medium-term financial assistance for Latvia

8 January: The European Commission proposes to the Council to provide medium-term financial assistance to Latvia as part of coordinated multilateral and bilateral financial assistance Choose translations of the previous link 

2008

19 December: Joint statement by the Presidency of the ECOFIN Council and the Commission on providing EU medium-term financial assistance to Latvia Choose translations of the previous link 

12 December: The Latvian authorities adopt "Economic Stabilisation and Growth Revival Programme", which forms the basis of the programme

Early December: EU financial assistance preparatory mission to Latvia, see statement on progress Choose translations of the previous link 

22 November: Joint statement by the Presidency of the ECOFIN Council and the Commission on providing EU medium-term financial assistance to Latvia Choose translations of the previous link 

November: In light of a rapidly deteriorating economic situation and concerns related to the health of the banking sector, Latvia turns to the EU, IMF and regional neighbours for financial assistance

Other sources and information about the balance-of-payments assistance to Latvia

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