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Monday 18.06.2018 | Name days: Madis, Alberts

Economic Diary. At least we have the best Finance Minister in Europe

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This week’s main event – Andris Vilks, according to The Banker, is the best Finance Minister in Europe.

Still something to work on

Even though Latvia’s GDP reduced by 25%, unemployment increased from 6% to 21% during the crisis it is no big deal. Vilks is not the one responsible in this financial cataclysm but he did achieve much in helping Latvia recover after the shock. “Economic growth of 2012 was 5.6% in the first nine months, which is the highest index among all EU countries. Furthermore, in December 2012 Latvia proved that it can pay beck its loan to the International Monetary Fund (IMF) ahead of schedule, even though its estimated return was to be 2015,” – as stated by the magazine.

Andris Vilks became the head of the financial institution in October 2010. Before then, he was the head economist of SEB Bank. Actually, Mr Vilks is a geography teacher by his education. However, he has been gradually increasing his knowledge and experience since 1990, visiting different management, marketing, investment, financial analysis and other related courses. And this is the result he managed to achieve not only for himself, but also for his home country.

Still, The Banker notes that the minister still has things to improve: unemployment is still high and economic growth is only felt by certain layers of society.

The total range of challenges can be expanded. Here are a few of them.

“Where’s the money, dear?”

This week, it became known that Latvia lost nearly $6 billion in the last decade (2001-2010). This money was taken away by export and import manipulations, – as believed by Global Financial Integrity.

Given the small size of our economy – this is a very serious loss. In conversion to the American currency, the 2013 revenue of our main budget is expected to be $6.3 billion. Analysts of Global Financial Integrity believe that the most popular way of smuggling money is “creativity” with the value of goods in international transactions: countries like Latvia lose billions because of heightened or lowered prices stated in invoices.

Wanted to make things better…

One more objective of our proud Finance Minister, though not as global, but no less important, is careful work on regulations. For example, it recently became known that the new edition of the VAT Law is causing a great deal of trouble for Latvian retail traders.

In the letter addressed to the Finance Ministry, the Latvian Traders Association notes that retailers are obligated to state the price of any product of service that costs less than 100 LVL without VAT on receipts. Otherwise the document cannot be submitted to the State Revenue Service (SRS) for the remuneration of tax. The only alternative other than reprogramming cash registers is to write paper invoices or receipts to clients. Retail networks prefer this alternative – cheaper, but also slowing the client servicing process.

As it turned out, this requirement appeared in the new VAT Law as a result of a technical error, on the Finance Ministry admitted this week. This is why the institution swiftly developed amendments that provide a return to previous order.

Your money, our banks

The minister could also review the question that was raised by the European Commission this week. The commission noted in its report a significant proportion of non-residential banking business in Latvia, which may present risks.

The EC primarily notes the so-called non-resident banks, the main activities of which include the servicing of foreign clients: “The government should carefully monitor the flow of money, where they are used, what these credit institutions do on the domestic market, etc. What is meant here is that the business environment and the legal system in CIS countries is often weak, and investments and credits often cause suspicions.”

The Finance and Capital Market Commission, on the other hand, notes that servicing non-resident banks is a significant part of Latvia’s financial system. The proportion of this sector has not changed since 2000. This means the range of questions is not new as well: banks recognize the possible risks and carry out measures to reduce them.

Euro is no longer too far away

Finally, one more objective – carry out a successful transition to Euro. This week featured the first meeting of the Euro Adoption Coordination Council, which is led by PM Valdis Dombrovskis. The guidelines of the Council were approved on an emergency government meeting this week as well. The goal of this new organization is the coordination of cooperation of state institutions, and the simplification of processes related to Latvia’s joining of Eurozone, as well as development of a dialogue with society.


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  1. Oddis says:

    Ha ha, is this some kind of a personal blog? Nice mixture of “journalism” and opinions in one article.

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