There are plans to provide the Minister of Finance the authority to use the funds of the state budget for the acquisition of fixed-income securities of capital companies in which the state has a decisive influence, according to the amendments submitted by the Ministry of Transport.
Currently, the conditions for the state budget contribution are determined by the state fiscal management provisions provided for in the law on budgetary and financial management, which do not allow the State Treasury to borrow in order to purchase long-term fixed-income securities. Instead, these terms only allow short-term transactions using free funds.
The Ministry of Transport explains the proposed amendments provide the state the opportunity to acquire bonds released by state-controlled companies
in order to promote Latvia’s capital market. These changes would allow the state to become more involved as an investor in the financial sector and strategically important companies.
By acquiring fixed income securities on equal terms with private investors in companies that are under the decisive influence of the state, the state can contribute to a more attractive and competitive investment environment, as reported by the Ministry of Transport. This approach would help stabilise and strengthen those companies, it would also allow the state to acquire fixed-income securities under the same conditions as other investors.
The redaction of the proposed legislative draft clarifies certain authority of the minister, specifically when it comes to using state budget funds to acquire securities of capital associations in which the state has decisive influence if it is done in order to implement long-term stabilisation reserves.
Together with amendments, the Ministry of Transport has submitted to the government its report “On the progress of the bond refinancing process of Air Baltic Corporation”. This report is confidential and is not publicly accessible.
As previously reported, July 2024 marks the end of the EUR 200 million bond maturity period for Latvian national airBaltic airline. This means the company is looking for external financing to refinance bonds. The airline also has plans to attract additional financing of EUR 100 million.
“The airline plans to not only refinance EUR 200 million, but also to attract additional EUR 100 million in order to improve the balance of funds and facilitate the financing of future capital investments related to the increase of the company’s capacity,” as mentioned in the airline’s report for 2023.
It also mentioned airBaltic has hired international investment banks and financial consultants. In parallel to that, the company is also working on various refinancing opportunities, including opportunities to raise funds in the public debt market and the private debt market.
Also read: Latvia’s economy is behind other Baltic States. Why is that?
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