The International Monetary Fund said on Tuesday it had not been consulted about Latvia's plans to use public money to rescue its majority state-owned airline and had concerns about the strategy.
Latvia, which secured a EUR€7.5 billion bailout from the IMF and the European Union in 2008 and must meet budget targets this year to complete the programme, last month announced plans to invest LVL16 million lats (USD$30.9 million) in airBaltic by mid-October.
The government, which owns 52.6 percent of the loss-making airline, has said it might need to adjust its 2011 budget to free up the funds, but has not consulted the IMF about its decision as is required under its bailout programme.
"Unfortunately we have not been consulted on this before arriving and before the agreement was signed," Mark Griffiths, head of an IMF mission visiting Latvia, told journalists on Tuesday after meeting Prime Minister Valdis Dombrovskis.
He said the mission had discussed airBaltic with Dombrovskis on Tuesday.
"We do have a number of serious concerns, in particular about injecting public money when there are no clear accounts," Griffiths said. "We need to make sure that public money is not wasted."
Under the plan to rescue the carrier, airBaltic's minority private shareholder, Baltic Aviation Systems (BAS), which has a 47.2 percent stake, will inject another LVL14 million lats.
The airline's share capital could later be increased up to LVL100 million lats by both shareholders. No deadlines have been set for increasing the capital.
"If the plan goes ahead, the Fund and the European Commission will be looking for additional budget measures to compensate for the cost," Griffiths said.
The government has said it had to help the airline, which is the country's largest exporter of services, contributing about 1.5-2.5 percent to Latvia's gross domestic product.
Latvia has agreed under the IMF/EU bailout to cut its budget deficit to 4.5 percent of gross domestic product this year and to 2.5 percent next year.
The deficit reduction is also necessary to keep the country's goal of joining the euro zone in 2014 on track.