* Latvia c.bank says IMF wants clarity on 2010 spending plan
* Sees IMF lending further when Latvia budget clear
* Bank says devaluation has not been, will not be discussed (Adds Finance Ministry quote)
By Patrick Lannin
RIGA, July 16 (Reuters) - The International Monetary Fund wants clarity on Latvia's 2010 budget before agreeing to any further funding, Latvian central bank Governor Ilmars Rimsevics said on Thursday.
He said he expected the Fund would eventually decide to give Latvia further backing, though the prime minister on Wednesday said the IMF had put forward tough conditions.
"The IMF does not itself dictate to Latvia, or tell Latvia what to do. It wants to see Latvian government action and understand how the 2010 budget will be drawn up," Rimsevics said after the bank left its refinancing rate steady at 4.0 percent.
"When this question is solved, I don't think the IMF will delay for long," he added. Prime minister Valdis Dombrovskis has said the IMF has raised the idea of Latvia further raising VAT, but Rimsevics said the central bank was against tax rises.
He said clarity over the budget and with the IMF was necessary to remove uncertainty over Latvia and to persuade banks to start lending again, which would boost the economy.
Rimsevics said that even with government cuts this year of 500 million lats, the budget deficit would be 9.5-10 percent of gross domestic product, about 1.3 billion lats ($2.62 billion).
He said further spending cuts should be based on structural reforms rather than one-off reductions.
"That means that in drawing up the 2010 budget decisions will again be needed on unpopular measures," he said.
The government has already decided to cut pensions and public sector salaries this year.
A joint IMF and European Commission is currently visiting Latvia. The EU has already decided to lend Latvia a further 1.2 billion euros, but the IMF has not decided about lending a further 200 million euros, delayed from earlier this year.
The money is part of a 7.5 billion euro rescue loan from the IMF and European Union which Latvia had to take last year after it decided to rescue its second-largest bank and its economy headed into a steep recession, slashing budget revenues.
The finance ministry said the IMF team would remain in Riga next week.
A key plank of the programme backing up the loan is retaining the peg of the Latvian lat to the euro, though Latvia has faced months of devaluation speculation.
Rimsevics reiterated that a devaluation "had not been discussed and will not not be discussed" in general.
Latvia faced devaluation speculation in June, but has consistently denied any intention to change the peg of the lat to the euro. (Reporting by Patrick Lannin; editing by Chris Pizzey)