Update Presentation

Update Presentation
the Republic of Latvia
April 2010

Presentation Overview
1. Overview and Latvia’s Fundamental Strengths 3
2. Impact of the Crisis and the Government’s Response 7
3. Initial Success 12
4. Government Debt and Funding Strategy 19
5. Conclusions 26

1. Overview and Latvia’s Fundamental Strengths

Latvia Overview
Territory: 64,559 sq km
Population: 2.3 million
Capital: Riga (population: 0.7 million)
Exchange rate: Latvian lat pegged to € since 2005
– YTD LVL/€ (average): 0.7028
– YTD LVL/$ (average): 0.5150
GDP: LVL 13,244 million/ LVL 5,874 per capita (as of 2009)
Credit ratings: Moody’s: Baa3 // S&P: BB // Fitch: BB+
Main economic sectors:
4
– Services (69.3% of GDP in 2009): logistics, IT, financial, trade
– Manufacturing (8.7% of GDP in 2009): wood, metal, textile,
chemicals, pharmaceutical
Foreign trade:
– Export: wood products, metal, chemicals, mechanical appliances,
food
– Import: mineral products, equipment, vehicles
– Main trade counterparts
– Import: EU (Lithuania, Germany, Estonia, Poland), Russia
– Export: EU (Lithuania, Estonia, Germany, Sweden), Russia
Life quality indicators:
– Life expectancy: 72.5 years (avg, 2008)
– Internet users: 60.9 per 100 inhabitants (2009)
– Retirement age: 62 years
– Average gross monthly salary: 461 LVL (2009)
Politics:
– Centre-right coalition headed by PM Valdis Dombrovskis
– President Valdis Zatlers
– October 2010: next parliamentary elections

Fundamentals Supporting Long-Term Growth
A competitive and developed economy with a proven attractiveness to investors
World Bank ‘Ease of Doing Business 2010’ Survey
Foreign Investment
Singapore
United States
Estonia
Lithuania
Latvia
France
Slovakia
Bulgaria
Hungary
Portugal
Slovenia
Romania
Spain
Poland
Italy
Croatia
1
4
24
26
27
31
42
44
47
48
53
55
62
72
78
Ranked 27 th (out of 183)
globally by the World
Bank on ease of doing
business
103
Cumulative FDI (LVL million)
6000
5000
4000
3000
2000
1000
Latvia has attracted
strong foreign
investment over the
years
In terms of business
friendly environment,
Latvia is ranked by
the World Bank¹
among:
− The top 3 CEE
countries
− Top 30 globally
by the World
Bank
¹ ‘Ease of Doing Business 2010 Survey
Russia
120
Brazil
Ukraine
Source: World Bank
129
142
0 25 50 75 100 125 150
Global Rank
0
2004 2005 2006 2007 2008 2009
Cumulative FDI stock in equity capital
Cumulative FDI stock in other capital
5
Source: Bank of Latvia

EU Fund Transfers
Latvia has been a substantial recepient of EU fund transfers, which has supported foreign fund
inflows
Inflow of EU Funds
Support Field Cumulative (LVL Million) (1) Total
Pre-accession funds (2) 115.1 5.1%
Structural funds (3) 797.0 35.1%
Cohesion policy (4) 548.7 24.1%
Common agricultural policy (5) 698.3 30.7%
Transition policy 64.1 2.8%
Other funds 42.1 1.9%
Non-EU facilities 18.5 0.8%
Repaid to EU -10.5 -0.5%
Total LVL 2,273.4mn 100%
(1) From 1 January 2004 to 31 March 2010
(2) Pre-accession funds help to finance a Member State's expenditure on conforming its laws to the existing body of European
Community law and on development in general.
(3) Structural funds allow the EU to grant financial assistance to help resolve a Member State's structural economic and social
problems.
(4) Cohesion policy funds are designed to offset the burden of the single market for the less-favoured Member States or regions of
Member States.
(5) Common agricultural policy funds represent agricultural subsidies paid to a Member State.
Source: The Treasury
Cumulative (LVL Million) (2)
Total
Current expenditure 1,773.2 78%
Capital expenditure 480.8 21%
Funds received but not yet spent 19.4 1%
Total LVL 2,273.4mn 100%
(1) Without state co-financing
(2) From 1 January 2004 to 31 March 2010
6
Use of EU Funds (1)
Note: calculated based on statistical assumptions used in EDP (Excessive Deficit Procedure) tables prepared for Eurostat
Source: The Treasury
Breakdown of Jan-Mar, 2010 Inflow of EU Funds (LVL 195.6mn)
Non-EU Facilities
2,8%
Other Funds
1,2%
Common
Agricultural Policy
33,0%
Source: The Treasury
Structural Funds
28,2%
Cohesion Policy
34,9%
Latvia's own resource payments to the EU
Cumulative (LVL Million) (1)
Total
GNI (2) 476.6 64.9%
VAT (3) 106.0 14.4%
UK correction (4) 56.9 7.8%
Traditional own resources (5) 94.5 12.9%
Agricultural levies 5.0 0.7%
Custom duties 86.4 11.8%
Sugar levies 3.1 0.4%
Total LVL 734.0mn 100%
(1) From 1 May 2004 to 31 March 2010
(2) Gross National Income, charged at a uniform rate of 0.73 per cent. of each Member State's gross national income
(3) Charged at 0.3 per cent. of Latvia's VAT revenue (harmonised to reflect VAT rate differences between Member States)
(4) Reflecting Latvia's contribution to the EU compensation paid to the UK in respect of its lower agricultural fund receipts
(5) This represents duties that are charged on imports of relevant products into Latvia from a non-EU state.
Source: The Ministry of Finance

2. Impact of the Crisis and the Government’s Response

EU Membership, Acceleration of Growth, and the Impact of the Crisis
EU membership in 2004 marked a turning point
EU Membership
Acceleration of Growth
Impact of the Crisis
Growth of trade accelerated
From 2004 to 2007 trade grew at
a compound annual growth rate
of 15.3%
Investment grew much more rapidly
than savings
Gross fixed capital grew by over
90%* between 2004 and 2007
Contraction in GDP
GDP contracted sharply due to
the economic crisis, 18% in 2009
Increase in unemployment
Capital inflows rose sharply
From 2004 to 2007 FDI grew at a
compound annual growth rate of
31%
Productivity in industry improved
Between 2004 and 2007
Industrial output increased by
over 20%
GDP per capita rose substantially
Over the same period real GDP
per capita grew by 38.7%
Current account deficit rose sharply
Latvia’s current account deficit
reached 22.3% of GDP in 2007
External debt grew to an unsustainable
level
Private sector credit as a proportion
of nominal GDP grew by 76%
between 2004 and 2007
Inflation accelerated
Annual average CPI rose by 6.2%
to 10.1% between 2004 and 2007
Having fallen for a number of
years, unemployment has spiked
in 2009-2010
Government’s fiscal position
Despite the historical fiscal
prudence, lower tax revenues
have impacted government
finances
Central Government Debt
Govt debt has increased, although
is still very low when compared to
EU peers
*Note: using the expenditure method
The emerging imbalances were intensified by the onset of the global recession
8
Source: The Treasury, Central Bank

The Government’s Response to the Crisis
Summary of Objectives
Overview of the Response
Immediate Priorities
Address the liquidity crisis
Ensure long-term external stability
Maintaining fixed exchange rate
Long-Term Stabilisation through fiscal adjustment measures
Readjust public debt levels to a decreasing and sustainable path
Progressively narrow budget deficits in line with IMF and EU targets
Achieve 3% of GDP budget deficit by 2012
Public finances to be ready for Eurozone entry
Stimulating economic growth
Realise long-term growth by implementing further structural reforms
Stimulating economic activity and improving competitiveness
Banking sector stability
Place the banking system on a stable footing with a solid capital base
Increase depositor and creditor confidence
Restoring confidence
Improve perception of Latvia in the eyes of foreign investors
Restore confidence of international financial markets
Maintain transparency while carrying out the reforms
Use of international support
Total €7.5bn of loans, including from IMF, EU, Nordic countries, EBRD &
other bilateral lenders out of which €4 bn have already been drawn (end
of March 2010)
Sufficient external funding to cover near term financing needs
Currency stabilised and fixed exchange rate maintained
Major fiscal reforms
Tax reform and expenditure cuts initiated with the 2009 Budget
2009 Supplementary Budget: further tax increases, expenditure cuts,
including pensions and social benefits
2010 Budget plans cements the fiscal consolidation
Wide-ranging structural reforms
Multi-phased pension expenditure cut
Substantial reforms in healthcare and education systems
Recapitalisation and reform
Largest Scandinavian banks have provided their long-term commitment
and support to Latvia
The role of the financial sector regulator has been strengthened
Consistent economic policy and commitment to Eurozone entry
Swift implementation of the crisis management measures
Commitment to adoption of the Euro by 2014
The Government is committed to the implementation of its recovery package, despite the
potentially painful adjustments in the short-term
9

Latvia’s Fiscal Strategy: 2009 and 2009 Supplementary Budgets
The Government has responded early and decisively by implementing substantial fiscal
consolidation measures and expenditure cuts supported by social partners
Expenditure Cuts
Public Administration
• Number of employees reduced
• Average monthly salary reduced by 20%
• Average remuneration reduction by more than 30% (bonuses
not paid, supplements, compensations and allowances
restricted)
• Reduction of number of agencies (from 76 to 39 agencies)
• Centralization of support functions (accounting, IT
maintenance, public relations, personnel management)
Education (since September 2009 a new financing model is
introduced “money follows student” model, optimizing school
network, increasing the number of students per workload)
Health Care (establishment of effective network of health care
service providers, reduction of the hospitals from 59 to 42,
budget expenditure is reduced by 0.6% of GDP in 2009 )
Revenue Increase
VAT increased from 18% by 3% to 21%; the reduced rate from 5% to
10%; reduction of number of goods subject to reduced VAT rate
Increase of excise tax on alcohol, tobacco, fuel, non-alcoholic
beverages, coffee
Increase of gambling taxes
Increase in dividend pay-out rates from state owned companies
Monthly personal income tax allowance reduced from LVL90 to LVL35
Fiscal Targets 1
Budget deficits targeted to be
- 2009: Below 10% of GDP
- 2010: Below 8.5% of GDP
- 2011: Below 6% of GDP
- 2012 and beyond: Below 2.9% of GDP
10
Government will continue adjustments every year until the budget
deficit is below the 3% of GDP Maastricht threshold
1. According to ESA95 methodology

2010 Budget Update
Expenditure Cuts
Decrease in remuneration of public sector employees
Average monthly salary reduction by 5%
In the 2010 Budget, the Government intends to focus both on revenue increase and expenditure
reduction for reducing the fiscal deficit
Reduction of administrative costs of ministries
Review of subsidies and grants, capital costs and transfers for
municipalities have been decreased
As well as:
– public procurements decreased
– implementation of investment projects revised
These measures are designed to reduce expenditures by around
LVL 244.6 million
Raise of PIT rate from 23% to 26%
Broadening of PIT base including all capital income with tax rate of
15% (dividends and interest are taxed with rate 10%)
Set a minimal level of excise duty
Increase the excise duty on wine and fermented beverages and
increase the excise duty on fermented beverages with absolute alcohol
content up to 15 per cent
Increase of tax on cars
Revenue Increase
Increase the annual fee on transport vehicles
Taxation of fringe benefit from using employer car for employee'
personal needs
Introduction of a new excise tax on natural gas
Increase of real estate tax rate form 1 to 1.5% on land and buildings
used for business activities
Introduction of a new real estate tax on residential buildings (including
progressivity (rate from 0,1% to 0,3% depending on cadastral value),
broadening of real estate tax base including civil engineering
structures
These measures are designed to increase revenues by around LVL
262.9 million
Fiscal Targets for 2010
11
Consolidated general government deficit/ projected nominal GDP: below
8.5% of GDP
Fiscal consolidation – 507.5 million lats: revenue – 262.9 or 2.2% of GDP
and expenditure – 244.6 million lats or 2.1% of GDP

Economic Stimulus
Economic growth • Credit guarantees (Latvian Guarantee Agency), till May’10 153 guarantees issued, in amount of 66
mn EUR; Rural Development Fund guarantees for agricultural companies in amount of LVL44 mn
Improving competitiveness
Latvian Mortgage and Land bank’s support programme for SMEs, Ministry of Economy programme
for promotion of business competitiveness and innovation in 2007-2013
Labour market Activities to improve labour elasticity and competitiveness
EU funds
2007-2013 funding allocation to export and infrastructure projects, business development;
accelerating EU fund allocation; reducing administrative borders; fund reallocation;
Export support
Export guarantees (Latvian Guarantee Agency), till May 20 th (2010), LGA has issued 36
guarantees, total amount of guarantees 2.2 mn LVL; export credit insurance
Resource effectiveness Heating energy saving for houses and centralized heat supply systems
Entrepreneurship support
Reduction of legal barriers for registration of real estate, construction, tax administration easening;
reduction of administrative barriers for company registration
Review of planned EU Funds’ activities
Support for SMEs through Mortgage and Land Bank (available amounts)
Objective: to find the most eligible way for implementation of the
EU Funds in the context of economic crises
Process: reviewed 85 of 150 EU Funds’ activities for 1’069 million
EUR (20% of total allocation of public funding for 2007-2013)
Result: reallocation of funding to the activities which would have
the most positive impact on the recovery of national economy
Start-up capital: LVL17 mn till 2013 (LVL1.7 mn issued)
Microcredits for SMEs: LVL0.565 mn till 2010
Improving competitiveness: LVL128.9 mm till 2013 (LVL119.7 mn issued)
Loans to SMEs and agricultural companies: LVL70.3 mn till Oct-2011 (LVL3.4 mn issued)
Loans to ensure current assets for agricultural products producing companies: LVL10 mn
till 2011
12
Source: Ministry of Economics

Structural Reforms to Support Sustainable Recovery
Education
Pension Reforms
Policy development based on negative demographic trends, new financing model - “money follows
student”, plan for optimisation of the vocational education institution network for 2010–2015
In 2010, it is planned to define necessary changes to the pension system to ensure financial
stability of the pension system in medium and long term.
Healthcare
• Improving management of the healthcare system, reduction of the hospitals from 59 to 42,
promotion of home care, development of the Emergency Medical Assistance Service
Public Administration
Wage reduction, reduction of employees in central state institutions, reduction of the number of
agencies (from 76 to 39 agencies), centralisation of support functions
Financial System • Banking system recapitalised, role of regulator strengthened, deposit guarantee laws streamlined
To mitigate some of the recent policy responses, the Government in close corperation with World Bank has designed a comprehensive
social safety net
Implementation of the Social Safety Net
Specific activities are foreseen for the domains of:
welfare (Guaranteed Minimum Income increase; provision of housing benefit; Emergency social employment program),
education (provision of education for children aged 5-6; provision of transport to schools for pupils from areas where schools have been closed down as a
result of the education reform),
transportation (compensation of losses to public transportation providers for transportation of particular socially vulnerable groups of people) and
health (compensation mechanism to cover the patient copayments for needy persons, medication for needy patients, accommodation expenses for needy
persons, provision of home care to needy persons with serious diseases; concentration of in-patient services to needy persons with mental diseases by
decreasing the number of beds and developing day care centres).
2010 State budget foresees financing for these activities in amount of LVL 56 645 569
Latvian Strategic Development Plan 2010–2013 is approved by government setting key
priorities and courses of action for economic growth and promoting social security, as well as
13
for improving efficiency of public administration

3. Initial Success

The Economy Is Already Adjusting and Reserves Have Recovered
Taking Place
15
10
5
0
-5
-10
-15
-20
-25
Source: Bank of Latvia
25
20
15
10
5
0
-5
-10
-12,8 -12,5
2,4
9,7
Source: Central Statistical Bureau of Latvia
Current Account (% of GDP) Inflation (%)
-22,5 -22,3
2004 2005 2006 2007 2008 2009
Real Wages (Y-o-Y % change)
15,6
19,9
6,2
-5,6
2004 2005 2006 2007 2008 2009
-13
9,4
The CA has
swung into
surplus in
2009 for the
first time in
a number of
years
Downward
pressure on
wages should
further boost the
competitiveness
of the economy
Source: Central Statistical Bureau of Latvia
4 000
3 500
3 000
2 500
2 000
1 500
1 000
500
6,2 6,7 6,5
Foreign Exchange Reserves (LVLm)*
After reaching
a peak in
2008, inflation
has reduced
by 15
percentage
points to 0.3%
Forex
reserves have
stabilized as,
among others,
substantial
EU/IMF funds
have been
received
0
2005 2006 2007 2008 2009 2010
* Net foreign assets equals convertible
Source: Bank of Latvia
Net foreign assets Monetary base foreign currency and gold reserves
The current account deficit has shifted substantially to a sizeable surplus, inflation and wages
15
have fallen and FX reserves have stabilised
20
16
12
8
4
0
10,1
15,4
2004 2005 2006 2007 2008 2009 Mar-10
3,5
0,3

Initial Success already Evident
Spending Cuts
Enacted
Earlier spending cuts have had the desired effect, enabling the
reduction of fiscal imbalances
Fiscal Targets
Met
The government is on track to meet its budget deficit target as
agreed with the IMF/EU
Extra Funds
Secured
Additional external funding has been obtained from the World
Bank, the IMF and the EU
Confidence is
Returning
Recent domestic debt auctions and tightening of sovereign credit
spreads show a return in investor confidence, credit rating
stabilising
The Government’s measures are already showing signs of success, with an improving fiscal
position and the return of investor confidence
16

Central government budget consolidation – expenditure reduction
Central government revenue and expenditure, mln lats
Several central government budget expenditure categories,
mln lats
6 000
1800
1600
5 000
1400
4 000
1200
3 000
Revenue
1000
800
Social benefits
Remuneration
2 000
Expenditure
600
400
Capital expenditure
1 000
200
-
Execution of
2008
Execution of
2009
Plan of 2010
0
Execution of
2008
Execution of
2009
Plan of 2010
17

Budget execution in 2009 and 1Q2010
10%
Budget Execution in 2009
9%
8%
7%
6%
5%
4%
3%
6,4% 6,8%
9,0%
• According to EU methodology
(ESA 95) general government
deficit in 2009 was 9.0% of GDP
– lower than 10% deficit limit set
by lenders.
2%
1%
0%
Central government deficit
(% of GDP)*
* On cash-flow basis
General government deficit
(% of GDP)*
General government deficit
by ESA95 (% of GDP)
Budget Execution in 1Q’2010
General government deficit target for 2010 - 8,5% of GDP (on ESA terms)
General government budget revenues in 1Q of 2010 were 5.7% less than in the same period of 2009, mainly due to
decrease of central government basic budget tax revenue; and expenditure were 5.8% less
As a result of better performance of VAT (by 20,4%) and corporate income tax (by 16,5 %) the state basic budget tax
revenues were higher by 7,4 % ( 26,6 million lats) than expected in the 1Q. However excise tax on tobacco has given by
37, 8% less income in the budget as planned
General government budget deficit in 1Q of 2010 was 1.1% of GDP according to national methodology. Central
government deficit was 1,5 % of GDP
18

4. Government Debt and Funding Strategy

115,8
Italy
Low Public Debt and Prudent Debt Management
Latvia has remained committed to keeping government debt at moderate levels…
Government debt is amongst the lowest in the EU
Conservative debt management policy has kept government debt at moderate levels over the past decade
Government debt is well within the Maastricht limit of 60% of GDP
General government debt at the end of 2009 was 36.1% of GDP
General Government Debt (% of GDP, ESA 95 methodology, 2009-4th quarter)
140
7,2
14,5
14,8
23,7
29,3
35,4
35,7
35,9
36,1
41,5
42,3
44,0
51,0
53,2
56,2
60,9
64,0
66,5
68,1
69,1
73,2
73,6
76,8
77,5
78,3
96,7
115,1
120
100
80
60
40
20
% of GDP
The 9th lowest
Debt to GDP
ratio in the EU
0
Estonia
Luxembourg
Bulgaria
Romania
Lithuania
Czech Republic
Slovakia
Slovenia
Latvia
Denmark
Sweden
Finland
Poland
Spain
Cyprus
Netherlands
Ireland
Austria
United Kingdom
Malta
Germany
EU-27
Portugal
France
Hungary
Belgium
Greece
20
…thus being in a position to comfortably absorb the full impact of the crisis

The Treasury’s Financing and Liquidity Strategy
The Treasury’s borrowing strategy has been focused on maintaining high levels of liquidity
The Treasury’s liquidity position stands currently at its historically highest
level
Main part of the International lenders’ money is considered as a reserve
or liquidity buffer
Currently financing requirement is covered mainly by domestic securities
issues (that is being rolled over)
1 800
1 600
1 400
1 200
1 000
Balance of Resources (Million LVL)
Received 3rd
tranches
from EC and
IMF
1,578
800
600
400
200
0
LVL million
5 000
4 000
3 000
2 000
1 000
0
-1 000
-2 000
-1 401 -1 286 -1 227
2010 (1) 2011 2012
Total central government financing requirement
Financing requirement forecast and associated funding
2 004
1 578
2010-end
2011-end 2 643
1 337
Liquidity Buffer 1 125
Liquidity Buffer
LVL 2,004 mn
LVL 2,643 mn 0
490 800 800
Domestic securities issues
2012-end
Liquidity
Buffer
LVL2,216
mn
Jan-06
Mar-06
May-06
Jul-06
Sep-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Million LVL 2010 (1) 2011 2012
Total central government financing
requirement (incl. refinancing of forecasted
T-bills)
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
(1,401) (1,286) (1,227)
Planned funding activities 1,827 1,925 800
Domestic securities gross issues 490 800 800
International support 1,337 1,125 0
Total Treasury balance (at year end) 2,004 2,643 2,216
i.a. earmarked for banking sector
support
456 - -
Mar-10
21
International support
Cash balance (at the end of previous period)
(1) April-December

Strong and Broad-Based International Support
Tough adjustment measures have earned international financial support for Latvia
Planned Assistance
(€ Million) 2009 2010 2011 Total
EU 2,200 700 200 3,100
Nordic Countries
(SE, DK, FI, NO, EE)
- 1,000 900 1,900
IMF 800* 500 400 1,700
World Bank 200 200 - 400
Other (CZ, PL, EBRD) 100 200 100 400
Total 3,300 2,600 1,600 7,500
* EUR 600 mn in December 2008
Other
€400mln
5%
IMF
€1,700mln
23%
WB
€400mln
5%
Breakdown by Institution
EU
€3,100mln
42%
Loans Disbursed to Date
(€ Million) Disbursed Date Disbursed
EU
IMF
EBRD
World
Bank
First Tranche 1000 February 2009
Second Tranche
Third Tranche
1200
500
August 2009
March 2010
First Tranche 600 December 2008
Second Tranche
200
July 2009
Third Tranche
Investment in Parex bank &
subordinated loan
200
February 2010
100 September 2009
First Tranche 200 November 2009
Total 4,000 -
The various financial assistance packages represent a total of
€7.5 billion in loans
As part of the assistance package, Latvia has committed to
implement an economic reform programme
Latvia’s assistance package is small relative to the resources
available to the institutions providing the support
Both the EU and the IMF have disbursed the third tranches of
their respective loans following successful economic and other
reform measures implemented by the government in the 2010
budget in accordance with these agreements
22
Nordic Countries
€1,900mln
25%
EU/IMF review mission is planned in May 2010
Source: Treasury, IMF, EU

Return of Investor Confidence
16
14
12
10
Recent demand for domestic debt and recovery in credit spreads underpins investors’
confidence in Latvia’s recovery
Average Weighted Yields at Domestic T-bills Competitive Multiprice Auctions
%
Latvia’s recovery has been further
boosted by the return of regular
domestic debt auctions
Since June 2009 the Treasury has
steadily been increasing the average
maturity of its domestic securities
portfolio by issuing longer dated
securities
Average weighted yield rates have
markedly decreased over the last
quarter of 2009 and 1st quarter of 2010
Credit spreads on Latvia’s Eurobond
have substantially rallied, tightening by
around 240bps since their highs
23
8
6
4.712%
4
3.038%
2
0
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10
1M 3M 6M 12M 2Y 3Y
Source: The Treasury.
5.933%
5.093%
3.18%
1.804%
Spread vs MS (bps)
700
650
600
550
500
450
400
350
300
250
Eurobond 2018 Performance
200
Nov-
08
Jan-
09
Mar-
09
May-
09
Jul-
09
Sep-
09
Nov-
09
Jan-
10
Mar-
10
Source: Bloomberg

Extended Maturity Profile and Decreasing Rates
Domestic T-Bill Competitive Multi-price Auctions in January-April 28, 2010
24
mn, lats
25
20
15
10
5
0
Source: The Treasury.
10 years
26%
Source: The Treasury.
5 years
16%
11 years
4%
28 days
4% 91 days
10%
364 days
24%
182 days
16%
2010 Jan-Apr 28:
LVL251.22 mn
3-m
6-m
12-m
3-m
6-m
12-m
6-m
12-m
6-m
12-m
6-m
12-m
6-m
12-m
6-m
12-m
6-m
12-m
2-y
6-m
12-m
6-m
12-m
2-y
6-m
12-m
2-y
6-m
12-m
6-m
12-m
12-m
3-y
6-m
12-m
January February March April
Amount sold (LHS) Bid-cover Ratio (RHS)
Bid-to-Cover ratio: Bid Amount to State Treasury offered amount
Domestic Securities outstanding at the 2nd quarter, 2009 and as of 30 Apr, 2010
10 years
24%
5 years
9%
3 years
2%
2 years
6%
11 years
4%
182 days
23%
364 days
32%
5,0
4,0
3,0
2,0
1,0
0,0
Ratio
Funding shifts away from
short term bills to medium
term bonds while average
yields decrease
In 2010 the government has
successfully completed 17
auctions of 3m, 6m, and 12m
T-Bills and 2y and 3y T-bonds
raising over LVL250mn in
competitive multiprice auctions
and LVL 355mn in total
(competitive multiprice and
non-competitive domestic
securities auctions).
As of 30 th June 2009, T-Bills
maturing in 28-days
represented 4% of total
portfolio
By 30 April 2010, the Treasury
achieved the following:
– No 28-day and 91-day
T-Bills were
outstanding
– The share of 182 day
T-Bills was increased
from 16% to 23%
– 6% and 2% of 2-year
and 3-year bonds
outstanding

Government Debt Profile
Modest government debt redemptions in the short-term
25
Latvia faces minimal government external debt repayments in the
next two years
– As 97% of 2010-2011 debt repayments are represented by
domestic debt, refinancing risk is minimal especially given
the recent successes in terms of domestic debt auctions
The largest portion of external government debt is now
represented by the recent EU and IMF loans which were incurred
since the start of the crisis
Eurobonds outstanding in amount of €800mn (2 issues) as of
31 st Mar. 2010
– €400mn due in April 2014
– €400mn due in March 2018
External Govt. Debt Breakdown (31st Mar 2010)
Source: The Treasury.
Eurobonds
15%
World Bank
4%
NIB
3%
Other
1%
European
Commission
49%
EIB
7%
IMF
21%
Modest nearterm
debt
redemptions:
LVL486mn over
2010 (98%
domestic debt)
Source: The Treasury.
Increase in
external debt
due to
international
financial
assistance
package
Debt Redemption Profile (end of Mar 2010)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1400
1200
1000
800
600
400
200
0
2010
2011
Domestic
External
2012
2013
Breakdown between External and Domestic Govt. Debt
Source: The Treasury.
2014
2015
43% 44% 42% 38%
57% 56% 58% 62%
2016
2017
52%
48%
2018
2019
2020
22% 20%
78% 80%
2004 2005 2006 2007 2008 2009 Mar-10
External
Domestic
Largest
commitments in
2014-15
represent
EU/IMF loans
>=2021

5. Conclusions

Key Conclusions
The Crisis a consequence
of economic imbalances
• Latvia is currently dealing with the consequences of imbalances neglected too long
during the boom years
Economic recovery is
Latvia’s No.1 Priority
• The Government is taking firm measures to stabilize the economy while preserving the
soundness of public finances
The Government is fully
committed to its policy
package
•Full recovery will take some time but the Government is committed to the full
implementation of its adjustment program, as painful as it may be
Fixed Exchange Rate is
the cornerstone of
economic policy
•The fixed exchange rate policy is intact and will drive needed improvements in Latvia’s
international competitive position
Strong support from the
international community
•The Government’s policies are backed by the international community, through support
packages by the IMF, the EU, the World Bank and the Scandinavian countries and others
Euro adoption remains a
core objective
•Latvia’s commitment to Euro adoption in 2014 is at the centre of our economic policies.
More reforms, not less will be needed to ensure Latvia’s future prosperity.
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