Second, repayment of the principal amount of loan lies ahead of our children in 2036. 20 years – for such a long period Latvia has never yet been accommodated with a loan.
The number of desirous to lend money to the republic appeared to be three times bigger than the republic required. Low rates and high demand for bonds are attributable to the Latvian economics – investors appreciate it as stable and predictable.
The borrowed 650 million will be allocated, inter alia, for repayment of old loans. In general, the national debt at the end of the first quarter made up 8.4 billion euro or 33% of GDP forecasted for 2016. Is it big or small?
From the point of view of many western countries, Latvia demonstrates a model abstinence from the temptation of living on credit. Latvian 33 percent look much more attractive than the external debt of Spain, where just the other day for the first time over the last more than 100 years the external debt of the government exceeded 100 percent of Spanish GDP. The situation is yet worse in Italy and in the USA, which a long time ago came to terms with debts in excess of annual GDP. But Singapore, for example, lives with the rate 408% at all.
On the other hand, Latvian 33 percent can be acknowledged as exposure to credit dependence on external financial injections. Particularly, when positive examples are not far to seek. In the north – Estonia with the debt of 8-10 percent of GDP, in the east – Russia, where the external debt makes up 12 percent. Many countries in the world keep within means. Rich Sultanate of Brunei in Southeast Asia can boast of zero external debt. It is not big in Algeria — 3 percent, Iran — 4 percent (but here, fair go, we ought to say that no one lends to Teheran, rather that it does not borrow). Debt hardly weights down Chinese economics as well – 16.2 percent.
If to take absolute figures, then the double gain in the external debt of Latvia is attributable to the recent recession in 2008-2010. Just then the government of Godmanis, in rescue of a tottering banking system and economics in general, was forced to take to the world with a hat in hand. The world is not without good people. Who just did not chip in, you name it, to prevent default in Latvian style. EU, IMF, EBRD, World Bank, Sweden, Denmark, Finland, Norway, Czechia and even Poland with Estonia gave money.
Eventually Latvia altogether borrowed 4.5 billion euro. Now it is time to repay — one good turn deserves another.
Candidate of Economic and Legal Sciences Eresko Artur (Ересько Артур).