Latvia Will Continue to Defend Currency: C. Banker
Latvia will continue to intervene to defend its fixed-rate currency as it has sufficient foreign exchange reserves to do so, Bank of Latvia governor Ilmars Rimsevics told CNBC in an exclusive interview Wednesday.
The Baltic country, which was hard hit by the global economic downturn, has no plans to devalue the lat and will not ask for more funds from the International Monetary Fund, Rimsevics added.
"We are in the (IMF) program and we don't have to go anywhere and we don't have to go and ask for more," he told "Worldwide Exchange."
"There will be new money disbursed as more reviews are in place," Rimsevics added.
Latvia has had to resort to a loan of around 7.5 billion euros ($10.5 billion) from the IMF to support its currency as its economy slumped by nearly 20 percent last quarter.
But the government had to take tough measures such as cutting spending and raising taxes in the middle of a deep recession to meet the terms of the loan and analysts have speculated that at some point the country will have to devalue the currency to ease the pain of economic adjustment.
Lending has fallen in the Baltic country of 2.3 million, but Rimsevics said he was not worried as the trend was normal after years of growth.
"Latvia's lending expanded 60-70 percent between 2004 and 2007. Only now, last month, in July, lending on an annual basis fell for the first time down in negative territory. Probably a contraction this year will be between 5-7 percent, I believe this is within the line that we have been predicting," he said.
"I think for the moment the banks don't see good projects so lending is coming down," Rimsevics added.
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