In late 2008, Latvian government turned to the European Union, International Monetary Fund and regional neighbours for financial assistance because of rapidly worsening economic situation and concerns related to the banking sector. Following multilateral negotiations in December 2008, an agreement was reached to provide multilateral financial assistance to Latvia with an overall amount €7.5 billion. This sum consists of the following contributions: €3.1 billion under a balance-of-payments assistance programme of European Community; SDR 1.5 billion (around €1.7 billion) under International Monetary Fund’s Stand-by arrangement approved of 23 December 2008; €1.9 billion from Nordic countries, including Sweden, Denmark, Finland, Norway and Estonia; €0.4 billion from the World Bank and the same amount from the European Bank for Reconstruction and Development, the Czech Republic and Poland.
The financial assistance of the European Union is scheduled to be disbursed in six parts:
€1.0 billion, released on 25 February 2009, following signature of the Memorandum of Understanding;
€1.2 billion, released on 27 July 2009;
€0.5 billion, released on 11 March 2010;
€0.2 billion, released on 21 October 2010;
€0.2 billion, expected to take place in two equal installments in 2011.
The average interest rate on the amounts so far disbursed by the European Commission is about 3.2%, repayments are to start in 2014.