Due to the Covid-19 crisis, it is better to reduce the growing public debt by wisely investing the currently available financing, the Governor of the Bank of Latvia Mārtiņš Kazāks said on Thursday at the Latvian Radio program “Krustpunkts”.
Commenting on the projected increase in public debt from the current 30% of gross domestic product (GDP) to about 50% of GDP, Kazaks acknowledged that the Covid-19 crisis will cause a “huge jump” in public debt, but Latvia can afford it.
The Governor of the Bank of Latvia also added that public debt can be reduced in two ways – by reducing expenditures or by growing the economy.
According to Kazaks, the funds currently available to Latvia need to be invested wisely and in several areas in order to reduce public debt at the expense of economic growth.
The Governor of the Central Bank acknowledged that the funds available to Latvia for overcoming the Covid-19 crisis and the following years must be invested purposefully, assessing the return to the whole society and not to individual groups.
According to Kazaks, the funds available to Latvia must be invested in solving long-standing structural problems, including investment in road improvement, education, health care, digitization, and “green” ideas.
“We can use this money as an opportunity to raise the Latvian economy to a higher level. If we push money into one area, we will create bubbles, which in turn can cause problems. Money must be diversified so as not to overheat the economy. If we put two billion euros into construction, A broader vision is needed, “said Kazak.
The Governor of the Bank of Latvia emphasized that Latvia should look at the available additional funds not as money that will help get out of the crisis caused by Covi-19, but as an opportunity for development.
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