Riga - Valdis Dombrovskis, who is likely to become Latvia's prime minister next week, said Friday the troubled Baltic state would probably need to negotiate a revised deal with the international lenders that have already offered it money.

Updating reporters on his efforts to establish a working coalition, Dombrovskis said that the worsening economic outlook would make it difficult for Latvia to stick to a commitment to limit its budget deficit to a maximum of 4.7 per cent of GDP in 2009.

In December 2008, the government of Ivars Godmanis secured a 7.5- billion-euro (9.5-billion-dollar) economic bailout package from the International Monetary Fund, World Bank, European Union and other international bodies.

Godmanis resigned on February 20, partly due to Latvia's nosediving economy.

The IMF-brokered bailout is conditional on the introduction of wide-ranging economic reforms and the observance of the budget deficit cap, but with official forecasts suggesting GDP could contract by 12 per cent or more in 2009, maintaining the budget deficit at such a level may prove impossible.

Dombrovskis was quoted by the Baltic News Service saying the deficit could reach 10 percent of GDP, without preventive measures.

He proposed a fresh round of budget and wage cuts, plus increased taxes on items including alcohol, tobacco and gambling to shrink the deficit to around 8 per cent of GDP, and said he would try to negotiate a revised deficit level from lenders.

"We will ask for their agreement for such a budget deficit figure... If not, then we will have to cut more radically," he said.

Einars Repse, the former Latvian prime minister and central bank governor nominated by Dombrovskis as the new finance minister said Friday that he would seek to avoid devaluation of the national currency, the lat, which is pegged to the Euro.

Speaking in the newspaper Diena, Repse said: "Maintaining the stability of the lat is one of the tasks I am setting myself." (dpa)