Finance watchdog: Latvia's debt is relatively small

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Latvia's government debt is small compared to those of other euro area countries and may be 45% of the country's gross domestic product (GDP) at the end of this year, Inna Šteinbuka, head of the Fiscal Discipline Council (FDP), said in an interview to Latvian Radio October 17.

According to Šteinbuka, Latvia's government debt currently accounts for half of what has been accumulated in other euro area countries; still, it is expected that the debt servicing costs will rise.

Latvia is currently channeling around €200 million annually for debt servicing, but this amount can grow by two to two and a half times. This means that there will be less money for other sectors, such as health or education, said the head of the FDP.

The cost of servicing debt depends on how quickly the rates of private banks and international banks will rise. While Latvia's debt is relatively small, we can borrow money at relatively low interest rates, said the head of the FDP.

The next year's government's budget deficit is planned to be reduced to 3.3% of GDP next year. Šteinbuka was skeptical that the government could manage it. Given the high uncertainty in the world, the possibility of an increase in government deficits should be taken into account, unless the economy suddenly starts to grow rapidly. In the long run, the deficit will still have to be reduced, the head of the FDP added.

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