Deutsche financing scheme for Riga left Latvia with $1 billion debt and reporting headache

A financing transaction arranged for Riga by Deutsche Bank shows how local authorities can lay their hands on spending money without reporting it as debt.

When the Latvian government told Riga it couldn't borrow the equivalent of $1 billion to build a bridge over the river Daugava in 2005, Deutsche Bank stepped in. Its solution – enhanced vendor financing (EVF) – would provide the money in a series of payments, allow the city a five-year grace period before repayments start this year and not need to be reported as debt, the bank claimed. The downside was the expense: 46% of the total 567 million lati bill for the bridge was interest.

Riga went