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Wednesday 23.08.2017 | Name days: Valgudis, Ralfs, Vitālijs

Economic diary. Government will help young families

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU2014 may become the year when Latvia launches a state support programme to stimulate housing loan sector. If this plan succeeds, over a thousand young families will be provided with guarantees for down payments at total amount of EUR 2 million.

The Saeima had first started discussing the need to develop mortgage sector stimulating mechanisms one year ago. However, all previous initiatives had been blocked by Finance Ministry and Unity. The solution had always come down to having adequate lenders save money for down payments on their own.

Everything changed after the resignation of Prime Minister Valdis Dombrovksis. The initiative to develop a state support programme for this sector was included in the declaration of the government formed by Prime Minister Laimdota Straujuma. At the beginning of 2014, it was planned to finance it using the money received from foreigners in exchange for residence permits. However, amendments to the Immigration Law have forced the government to seek new sources of funding.

The coalition’s council had reviewed the new proposal and approved it this week. Economy Minister Vyacheslav Dombrovskis announced the programme will be launched this year. Economy Ministry and Finance Ministry plan to develop the necessary regulations within the next couple of months.

According to estimates of Association of Latvian Commercial Banks, 14% (100,000 Latvian households) plan to improve their living conditions in the near future. But only 3% have the opportunity to perform down payments. According to estimates, a single family can expect to receive state guarantee worth EUR 2,000, which will help cover the down payment (10-20%) of housing loans ranging within EUR 10-20 thousand.

Port dues

This week’s meeting of Latvian Port, Transit and Logistics Council included the topic of having the three largest sea ports of the country pay rent for the use of public property. Prior to this meeting, it was planned to have Riga, Ventspils and Liepaja sea ports perform the first payments in 2015. However, the Law on State Budget of 2014 clearly states: after the approval of amendments to the Law on Ports (this had happened a long time ago) the head of Finance Ministry will be able to increase government spending outlooks every quarter in the amount of payments received from ports. Therefore, the institution already has the required authority and the ministry can therefore request money starting this April.

During the discussion, sides agreed on the following: specialists of Transport Ministry will evaluate conclusions made by different institutions over the course of the next couple of weeks. It will then be decided whether or not to turn on the counter this spring-summer or wait until 2015, when annual accounts of ports will have been prepared for 2014.

The new tax system for ports provides for having payments of 10% of the anchor, Channel, tonnage dues be transferred to municipalities and the state. It is planned that 90% of received amounts will be returned to tax payers in the form of subsidies to maintain the ports’ surrounding areas. 10% are to be spent on state roads.

Expensive pleasure

The Cabinet of Ministers Committee has been hard at work as well lately. It was decided on the last meeting that the share of bio-fuel in vehicle fuel should be no less than 10% starting 2020. This decision caused uproar from representatives of this sector, because it was made without their participation. President of the Biofuels and Bioenergy Association Daumants Znatnais, a written protest will be submitted against this. It is added that the government has not included a single point that would provide even indirect support for bio-fuel manufacturers.

Meanwhile, according to the head of this association, this sector will not survive without state support. This means it will be necessary to procure additional fuel from abroad by 2020. The only plant in Latvia that still specializes in such products is Bio-Venta. But because loans were taken in 2008 to finance the plant’s modernization, there is no way it will be able to survive without external funding. He also said the association’s opinion will be taken into account in the next meeting of the Cabinet of Ministers Committee.

The development of bio-fuel sector was part of the Latvian government’s priorities in 2003-2010. Over the course of this period of time, the government invested a total of LVL 67.2 million in the form of direct subsidies. It was originally planned to have these plants produce 75,000 tons of fuel by 2010. But actual returns have been 58,383 tons and 39,451 ton of which were exported from the country.

How to endure a crisis

Institute of Latvia’s Foreign Policy presented a compilation of articles titled ‘Policy of Economic Stability: reaction of Baltic Countries and Visegrád Group to the European economic crisis’ this week. The presentation featured authors from seven countries participating in the project.

As noted by deputy Director of ILFP and editor of this compilation Karlis Bukovskis, the problems countries faced were of different degree. Therefore, these problems required differed approaches.

Over the course of the economic crisis, some countries employed very strict austerity measures (Baltic States and Hungary). Some countries used varying degrees of austerity measures. In order to compensate the decline in revenue, some countries released state bonds (Lithuania in particular), others were forced to turn to international creditors (Latvia and Hungary).


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