Vilnius/Riga - Lithuania's recently-installed government won a thumbs-up from the International Monetary Fund (IMF) Tuesday for austerity measures designed to rescue the Baltic state's economy from the threat of a serious recession. Catriona Purfield, the head of the IMF team that has been in Lithuania for the last week, confirmed that Prime Minister Andrius Kubilius had not asked for a loan from the IMF.
"Lithuania has not requested such assistance," Purfield said.
Neighbouring Latvia has already joined Ukraine, Hungary and Iceland in seeking an IMF bailout, while on Monday Estonia said it did not need similar help.
"Lithuania's economy is facing challenges. Bold early political actions and the anti-crisis plan will enable Lithuania to overcome these challenges," predicted Purfield.
She said the IMF had advised the government further to reinforce the financial sector against the consequences of an economic slowdown and backed government plans to increase the rate of VAT and instigate big cuts in public spending.
"The mission approves these cautious measures," Purfield said.
She added that devaluation of the national currency, the lita, was not desirable, a position reiterated by Kubilius after his meeting with the IMF delegation.
"There is no prospect of the devaluation of our currency," he told journalists.
While confirming that he had not asked the IMF for a loan, Kubilius hinted that he might reserve the right to do so in the future.
"We must be prepared to act appropriately to future challenges," he said.
Further north in the Latvian capital, Riga, Christoph Rosenberg, head of the IMF team negotiating with the Latvian government, emerged from a closed meeting Tuesday evening to tell reporters details of a bailout package would be released "within the next few days, certainly before Christmas."
"Latvia is at a turning point," Rosenberg said. "Life will be affected but let's not forget that life was very good for the last few years."
Earlier on Tuesday the central banks of Denmark and Sweden said they had signed a swap agreement with the central bank of Latvia guaranteeing short-term loans of up to 500 million euros (675 million dollars).
The swap agreement allows Latvijas Banka to borrow euro against Latvian lats "when and if the need arises," a statement said.
