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Saturday 23.06.2018 | Name days: Līga
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Economic diary. How much we pay our government’s debts

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThe Construction Law will soon include an amendment, according to which Latvia will once again have a government bureau to monitor construction. This decision was made by the Economic, Agricultural, Environmental and Regional Policy Committee this week. It is said that this new structure will begin its work starting with September 1st, 2014.

The legislative process is currently progressing slowly. However, amendments to regulations of the country’s construction sector are expected to be adopted before Ligo.

Specialists have been talking a lot about the necessity of creating an independent state institution to monitor the construction sector. This topic became more important after the Zolitude tragedy.

As BNN had previously reported, Latvia had terminated its original Construction Inspection Office during the crisis of 2009. Its functions were entrusted to multiple state institutions. Some were adopted by municipal governments. In 2011, however, then the Environmental Protection and Regional Development Minister Raimonds Vejonis warned that this reform was ineffective – construction inspectors were not able to handle the load of work they had. The number of construction inspections had dropped by 70%. The ministry then offered to restore the Construction Inspection, but the Saeima declined the initiative.

As it was explained by the head of the Saeima Economic, Agricultural, Environmental and Regional Policy Committee Janis Ozolins, the new Construction Monitoring Bureau would be partially similar to the State Construction Inspection Bureau. There will be a total of 34 inspectors. This institution will be a subordinate of Economy Ministry.

The price of the crisis

Another important event to hit this week was Latvia’s repayment of part of its debt to the European Commission. The amount paid was EUR 1 billion. This is only part of the loan that was provided to Latvia during the crisis. The next payment will be carried out in 2015. The EC will be paid EUR 1.2 billion and the World Bank – EUR 60.05 million.

All debts must be paid, especially because this particular debt is of the Latvian government. Its weight is equally distributed on all residents of Latvia. In a situation when the country’s population continues to decline, the matter regarding the weight of such debts becomes more and more serious. Last year, the government spent EUR 300 million (EUR 150 per capita) just to maintain the debt. This amount does not include the payment of the main amount and interest.

According to estimates of Finance Ministry, the state and municipalities concluded 2013 with EUR 128 million in deficit. However, the final figure will likely be even higher, because it will include interest. According this this, each resident of Latvia will have to pay EUR 62. Not much at first glance. But if we add to that the 1 billion that was paid this week, it seems that all residents of Latvia have paid EUR 4,830 each.

No changes so far

Nevertheless, the state is busy making money as well. In particular, the government makes considerable money in exchange for residence permits. There is some good news there: according to data of Latvian Real Estate Association, the rising tension between Russia and Ukraine has not impacted the demand for real estate properties in Latvia. Investments into Latvia’s real estate segment remain on the level of 2013.

In 2013, citizens of Ukraine invested a total of EUR 11.5 million in Latvia in exchange for residence permits. Ukraine ranks 3rd in terms of investments; right after Russia and China.

The outlook regarding the development of the conflict between Ukraine and Russia may have several possible scenarios, according to experts of LANIDA. First – the internal political situation in both countries may cause an increased outflow of funds from Russia and Ukraine. Some of this money may end up in Latvia. However, it is hard to predict the exact volume at this time. Second – investments may remain on the current level, because recent surveys suggest the supply in Latvia that complies with demands of foreign customers has increased.

According to the State Land Service, citizens of foreign countries had bought enough real estate properties to be worth EUR 285 million without residence permit requests. Those who did request residence permits had invested a total of EUR 363 million throughout the period of 2010 and 2012.

Eastern delights

This week, it became known that Riga will have its own Uzbekistan’s trade house from now on. The interests of this country will be represented by Uzbekistantradinghouse. According to experts’ estimates, this trade house will allow manufacturers from Uzbekistan to enter no only Baltic markets, but also become an outpost of Uzbekistan in EU countries. Most importantly, this new trade house will focus on the realization of ecologically clean and high-quality goods from Uzbekistan. This first export supply run has been carried out – a cargo of dried fruits worth USD 35,000. This is the third such house Uzbekistan has in foreign countries. Aside from Latvia, Uzbekistan has a trade house in Moscow (Russia), and Shymkent (Kazakhstan).

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