LATVIAN PM ASSURES AFGHAN CONTRIBUTION SAFE,

C O N F I D E N T I A L RIGA 000494


SIPDIS

DEPT FOR USED IMF

E.O. 12958: DECL: 10/02/2019
TAGS: PREL PGOV ECON EFIN MARR LG
SUBJECT: LATVIAN PM ASSURES AFGHAN CONTRIBUTION SAFE,
PLEADS FOR FLEXIBILTY ON BUDGET WITH IMF

REF: RIGA 00474 (NOTAL)



Classified By: AMBASSADOR JUDITH GARBER FOR REASONS 1.4 B AND D


1. (C) Latvian Prime Minister Valdis Dombrovskis assured
Ambassador Garber that military budget cuts would be limited
to ending "non-core activities" and postponing some
procurements. "We intend to continue our engagement in
Afghanistan as a priority," he remarked, noting that Latvia
would seek to expand cargo shipment activity via Riga port to
Afghanistan. Construction of a new military airport in
Lielvarde would also continue. This assurance was in
repsonse to a September 29 letter to the Prime Minister from
the Ambassador, appealing for the maintenance of a viable and
professional military. This letter was sent due to reliable
reports that drastically deep cuts in military personnel were
under consideration (reftel).


2. (C) The Prime Minister used the occasion to plead for
flexibility and patience in meeting the IMF criterion of 8.5
percent of GDP for Latvia's budget deficit. While the IMF
stance was initially firm, he said, there was now some
"readiness for discussion". 275 million lats in fresh budget
cuts and 49 million lats in new revenues still left the 2010
Latvian budget 175 million lats over the limit, according the
the IMF methodology of deficit calculation. He asked that
the IMF consider 8.5 percent as a target, rather than a
maximum. According to Latvian and EU methodology, "we are
pretty much there", he argued. He noted that the closing of
schools and hospitals created "high social tension", teachers
were preparing to strike, and 2000 police officers had signed
an open letter objecting to salary cuts. He said political
stability was under threat. "If you squeeze it too hard, it
will just break apart."


3. (C) The Ambassador thanked the Prime Minister for Lativa's
contribution to NATO efforts in Afghanistan, expressed
understanding that some defense cuts would be required, and
undertook to relay the PM's appeal on the budget deficit. She
noted that Latvian Finance Minister Repse would be meeting
with Treasury officials in Istanbul on Monday, October 5.
GARBER