Latvia has a new action plan to support public in resolving financial distress
The European Bank for Reconstruction and Development (EBRD), in cooperation with the European Commission (DG REFORM) and a consortium of financial, legal, and communication experts led by PwC Latvia have completed a 17-month project to evaluate the information resources on financial distress available to stakeholders in Latvia. The project, financed by the European Union through the Technical Support Instrument, aims at supporting the financial wellbeing of the Latvian public amidst current inflationary pressures in the country. Its outcomes and recommendations have been presented to the Latvian Ministry of Justice.
The project showed that a high number of people have searched for information on the management of financial distress in the past, especially in the consumer group, and that the awareness of the options available to deal with financial distress is low.
A key outcome of the project is thus a set of new action plan, issued by the Ministry of Justice, for engaging with individuals and businesses seeking information on financial distress.
These include an innovative set of algorithms for future use on a user-friendly Latvian government information website, which will direct stakeholders to the best opportunities and information available for the management of financial distress. Once implemented, this will significantly ease the process for gathering information about what to do when consumers and businesses enter a state of financial distress.
The project made also five high-level recommendations for improving communication to businesses and consumers, taking into account two closely interlinked topics: financial literacy and early warning:
- Strengthening cooperation among government institutions to implement activities in coordinated manner
- Developing more user-friendly content for the target audience,
- Using both digital and non-digital communications channels,
- Piloting projects to be implemented in municipalities, as well as institutions like the State Probation Office and the Latvian Prison Administration, to help their clients to understand how to manage financial distress,
- Conducting an awareness raising campaign to make sure information about materials available.
The project is part of a new EU approach to encourage businesses to act early to tackle any financial difficulties and improve their prospects for successful turnaround. It builds on a recent analysis of debt restructuring in Latvia by the Ministry of Justice with support from DG Reform and the EBRD and a reform by the Ministry introduced in 2022 to provide the most vulnerable consumers with a debt discharge procedure.