* Latvia will fulfill IMF obligations, FinMin says
* High deficits, wages are a problem, not the FX rate
* Economy looking better than expected
* EU joins calls for Latvia to meet its targets
(Adds details, background)
By Toni Vorobyova
ISTANBUL, Oct 6 (Reuters) - Latvia will fulfill its obligations to the IMF, Finance Minister Einars Repse said on Tuesday, adding that high deficits and high wages rather than the exchange rate were to blame for its problems.
European Union member Latvia agreed a rescue package with the International Monetary Fund and EU last year, promising to cut spending in 2010 by 500 million lats ($1.04 billion).
But on Saturday it said cuts would total only 225 million lats, prompting Anders Borg, finance minister of Sweden, which holds the EU presidency, to warn that international patience with Latvia was limited. [ID:nL4539092]
"It's very clear that we will fulfill and we have to fulfill our agreement with the IMF," Repse said on the sidelines of the semi-annual meetings of the International Monetary Fund and World Bank. He added he was due to meet IMF Managing Director Dominique Strauss-Kahn later on Tuesday.
The European Commission also joined Sweden in urging Latvia to meet its 2010 budget cut and deficit targets.
"This (sticking to the targets) is necessary to renew trust (in Latvia) so that the country can later finance itself without international aid," European Monetary and Economic Affairs Commissioner Joaquin Almunia said in a statement.
Not all the 500 million lat consolidation needed to reach a budget deficit of 8.5 percent of gross domestic product (GDP) should come from spending cuts, he added.
Latvian Prime Minister Valdis Dombrovskis, responding to Almunia's comments, said in a statement Latvia would live up to its commitments but also had to promote economic development.
Concerns about potential problems in talks with
international lenders, as well as a fresh wave of devaluation
worries, knocked the Latvian lat to the weak end of its pegged
band against the euro on Tuesday
Asked if the IMF has pushed for a weaker lat, Repse replied: "No, I don't think so."
"The currency is not to blame for our maladies," he added. "Our problems are too-high wages and too-high deficits, and we are working on those. We are making adjustments."
Repse said that for this year, Latvia's budget deficit will come under the 10 percent of gross domestic product level set under the terms of the bailout.
"The economic situation seems a bit better than initially expected. The deficit looks milder than forecast, well below 10 percent, including all the adjustments," he said. (Reporting by Toni Vorobyova and Patrick Lannin; Editing by Tim Ahmann and Malcolm Davidson)