The time of cheap money is over, and both the state debt service fee and the price of loans for the state will go up in the coming years, said Minister of Finance Arvils Ašeradens at a meeting of the National Council for Trilateral Cooperation (NTSP).
The minister stresses that Latvia’s state debt remains one of the lowest among EU and Eurozone member states.
It is expected for the general government debt to be at 40% of GDP at the end of 2023. In the coming years the debt level will stabilise at 41% of GDP. The medium-term debt condition listed in the Fiscal Discipline Law (60% of GDP) will be maintained.
In the next three years Latvia will need to refinance its debts worth EUR 5.5 billion.
Because interest rates have gone up significantly since the start of 2022. This greatly affected loan costs. Debt maintenance costs will go up in the medium-term perspective, said the minister.
For example, in 2022 the state debt maintenance cost EUR 167 million, in 2023 it cost EUR 202 million, in 2024 it will be EUR 362 million, and in 2025 and 2026 it will cost EUR 498 million every year.
According to the government’s debt repayment schedule, Latvia will need to pay back EUR 1.633 billion next year, EUR 1.862 billion in 2025 and EUR 2.02 billion in 2026.
Ašeradens said that while until now Latvia was able to borrow from international financial markets with a “zero comma” interest rates, we can now forget about all that. From now on interest rates will be 3-4-5%. “Money will have a different price, it will go up. The time of cheap money is over,” added Ašeradens.
On the 1st of November Latvian government approved the state budget project for 2024, 2025 and 2026. In it, the state consolidated budget revenue for next year is planned at EUR 14.486 billion and expenditures are planned at EUR 16.212 billion.
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