Government borrows 2 500 lats to finance budget deficit | BNN-NEWS.COM

Uldis Rutkaste

Latvia governmental debt hit 45% of GDP in late 2010, which means the government has borrowed over 2 500 lats per capita, says Uldis Rutkaste, deputy head of the Bank of Latvia Monetary Policy Department.

He stresses in order the government could repay the debt each person will have to pay 2 500 lats in taxes plus the interest to the creditors.

In 2010, each resident of Latvia paid on average 1 500 lats in taxes. This means all the Latvian population should work more than one and a half year for the government to repay the debt, moreover, it is on the condition that the money collected from the taxes is spent for that matter and only, the expert explains, admitting, of course, that is is not realistic.

Neither do other governments repay their debts in one attempt, usually they are re-financed on capital markets, which means a new loan is obtained to repay the old one, thus the repayment term can practically be extended until eternity, Rutkaste.

At the same time, he does stress there will unlikely be someone ready to lend to such never-ending terms, as practice shows creditors lend less to countries with a certain amount of debt. Developed countries are trusted more and, thus, the threshold in higher, he says.

Source: http://bnn-news.com/government-borrows-2-500-lats-finance-budget-deficit-29832

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