Riga  - The International Monetary Fund (IMF) will open a permanent office in the Baltic state of Latvia "very shortly" officials confirmed Thursday in the capital, Riga.

The news came after the IMF's Mark Griffiths and Elena Flores met with Latvian Prime Minister Valdis Dombrovskis, other members of his administration and officials from the Latvian central bank.

In response to a question from the German Press Agency dpa, Griffiths told reporters "We will be opening an office very shortly."

A day earlier, the IMF said it would open an office in Hungary to monitor the use of its funds under the terms of a "stand-by" agreement with the government.

Griffiths said Thursday's talks were "very productive" but were only preliminary discussions.

"I am very convinced about Prime Minister Dombrovskis," Griffiths told reporters.

Dombrovskis said it would take about a month to produce definite figures for a fresh round of budget amendments, during which time his government would concentrate on "structural changes" in areas such as health and education.

In December 2008, the previous Latvian government secured a 7.5-billion-euro (10-billion-dollar) economic bailout package from the International Monetary Fund, World Bank, European Union and other international bodies that depended upon Latvia limiting its 2009 budget deficit to around 5 per cent of gross domestic product (GDP).

But the economic situation in Latvia, which joined the EU and NATO in 2004, has deteriorated sharply since then and the new government is asking for the limit to be loosened to 7 per cent of GDP.

There was some good news on the Latvian economy with the release of figures showing the country's balance of payments deficit narrowed in the fourth quarter of 2008 to
8.3 per cent of GDP compared to 18.3 per cent in the corresponding period of 2007. (dpa)