A loan package worth EUR 7.5 billion (USD 10.5 billion), aimed at helping Latvia stabilize its economy, has been announced by the International Monetary Fund.

The agreement between the IMF and Latvian authorities still needs the approval of the fund’s executive board, but that is expected before the end of the year.

The Dec. 19 announcement by the IMF comes a week after the Saeima approved a tighter 2009 budget that includes big cuts in government spending and higher taxes.

The loan package includes:

• EUR 3.1 billion from the European Union
• EUR 1.8 billion from Denmark, Norway and Sweden.
• EUR 1.7 billion from the IMF.
• EUR 400 million from the World Bank.
• EUR 200 million from the Czech Republic.
• EUR 100 million each from Estonia, Poland and the European Bank for Reconstruction and Development.

“We will continue assisting the Latvian authorities in their courageous efforts to adjust in the midst of the global financial turmoil and we will work closely with them and other stakeholders as the program unfolds,” IMF Managing Director Dominique Strauss-Kahn said in a press release.

A World Bank spokesperson said the organization welcomes the agreement.

“This is a fragile period,” said Shigeo Katsu, the World Bank’s vice president for Europe and Central Asia, said in a press release, “so we must do everything we can to prevent the financial crisis from becoming a human crisis. As part of the international effort, the World Bank stands ready to do its part to provide financing and help tackle long-term structural problems.”