IMF suggests Latvia should break soft-peg with euro: finance minister

Standing left to right – Mr. Dinesh Jebamani (Chief Manager Liability Product Management and New Age Media – Seylan Bank), Mr.Sudesh Peiris (Senior Manager – Digital Banking Channels – Seylan Bank), Ms. S.Senevirathne (Representative of the Revenue Department – Western Province), Mr. Tilan Wijeyesekera (Deputy General Manager – Retail Banking – Seylan Bank) and Mr. Malik Wickremanayaka (Deputy General Manager – Operations – Seylan Bank)

RIGA, December 4, 2008 (AFP) – The IMF has suggested that Latvia drop the peg linking its national currency with the euro to help solve the country’s deepening economic woes, Finance Minister Atis Slakteris said Thursday, adding that his government disagrees.

“There is a group of experts of the International Monetary Fund that thinks that Latvia can solve the crisis by devaluing the lat,” Slakteris told reporters as talks continued with the global lender on shoring up the Baltic state’s struggling economy.

No comment was available from the IMF negotiators.

Latvian authorities have repeatedly rejected talk of devaluation.

Speaking to reporters following a parliamentary session on the crisis Thursday, Prime Minister Ivars Godmanis repeated the stance.

“There will be no devaluation,” he insisted.

Slakteris noted that the example of Argentina was being cited.

Argentina broke its currency peg to the dollar during its 2001 economic crisis, using devaluation as a tool to make exports more competitive.

“The common position of the Bank of Latvia, the government of Latvia, and our friends in the European Union is that it’s incorrect” to use the example of Argentina, he said.

“We have a totally different situation. Devaluat