Riga - The International Monetary Fund said Thursday it was concerned about the possible impact of hard-hitting budget cuts on the most vulnerable members of society in the Baltic state of Latvia.

Speaking in Washington DC, IMF spokeswoman Caroline Atkinson said: "We have been particularly concerned to avoid any social costs that could be involved in some of the measures that have been under consideration, to help the authorities to protect the most vulnerable."

In June the Latvian government passed a revised budget that slashed 500 million lats (1 billion dollars) from public spending as part of efforts to meet the terms of a 7.5- billion-euro loan package brokered by the IMF and involving the European Union, World Bank and regional governments.

Measures included dropping the old-age pension, lowering the minimum wage and imposing wage cuts of up to 35 per cent for public sector employees.

With unemployment rising to around 15 per cent and the economy as a whole expected to contract by at least 18 per cent this year, many Latvians are fearful of the future.

An IMF mission is currently in the country reviewing the progress made by Prime Minister Valdis Dombrovskis and his coalition government.

The European Commission has already promised a 1.2-billion-euro payment by the end of July, but the IMF has yet to decide whether it will release a scheduled 200- million-euro payment.

A previous payment of the same amount was withheld after the IMF decided reforms were not happening fast enough.

Earlier on Thursday, Latvian central bank governor Ilmars Rimsevics said that if the IMF money was not forthcoming, next year's budget would need to be trimmed even more, but that he was "hopeful" the money would be paid once the shape of the 2010 budget became clear.

Rimsevics stated that devaluation of the Latvian currency would do nothing in the current situation except cause "huge chaos" and said a stable economic environment was needed in order to attract investment.(dpa)