Strong austerity measures allow Latvia to pay back IMF bailout funds – Good or bad?

Latvia has cut spending so much that even the International Monetary Fund says it’s gone too far. Now the Baltic nation has paid off its 2008 bailout loan before any other nation, depriving the lender of any say-so over its policies.

A drop in the guaranteed minimum income, which aids the country’s poorest, took effect Jan. 1, two weeks after Latvia paid off the IMF’s chunk of a $9.9 billion rescue loan. The fund, better known for making deficit-cutting a condition of its lending, says the changes risk denting the social safety net.

Latvia’s recovery from a slump that erased almost a fifth of economic output has split world opinion. Nobel prize-winning economist Paul Krugman has criticized its austerity measures even as European leaders call them an example for the continent. While backing fiscal rigor, IMF opposition to the nature of some of the cuts has often put it at odds with the government.

Via – Bloomberg

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