RIGA - Bank of Latvia President Ilmars Rimsevics said last week that the repegging of the lat to the euro went smoothly and that the bank did not have to intervene on the foreign exchange market.
"The repegging proceeded smoothly and successfully, and the lat has been neither devalued nor revalued due to the peg," he said on Jan. 14. He reiterated that the rate of 0.702804 lat per 1 euro, established by Europe's central bank, was largely favorable to Latvia's economy.
"The estimate of possible gains and losses should take account of the fact that settlements in Latvia's foreign trade mostly use both euro and the U.S. dollar 's hence the possible effects of the rate at which the lat was pegged to the euro differ," said Rimsevics.
He explained that the latest data showed that 56 percent of exports and 58 percent of imports were denominated in euros, while the respective figures for the U.S. dollar are 19 percent and 24 percent. So the number of those losing and gaining from the relatively low exchange rate of the lat is generally balanced.
While admitting that the lower-than-expected lat-euro rate could make imports from EU countries more expensive, Rimsevics stressed that the high rate of the lat against the dollar made imports denominated in U.S. dollars cheaper. This, he said, should dampen the overall effect on consumers.
Meanwhile, the central banker said annual inflation this year should be 4.5 percent 's 5 percent and that several regulated prices would rise, including excise taxes on cigarettes, natural-gas tariffs and heat-supply tariffs, putting pressure on consumer prices. "I hope the Latvian government and other institutions very carefully study the need for raising those prices, especially in regards to the increase of gas tariffs," he said.
