(Adds Finance Ministry official, currency market, debt sale)
By Patrick Lannin
RIGA, Nov 26 (Reuters) - Latvia wants 1 to 3 billion euros ($1.3-3.90 billion) from the International Monetary Fund and European Commission, with final sums depending on an economic plan under negotiation, the Finance Ministry said on Wednesday.
Prime Minister Ivars Godmanis said a deal could be done next week after Latvia became the second European Union state after Hungary to turn to the IMF for help. The rescue was needed after its economy slid into recession, the budget deficit began to spiral higher and it had to take over its second-largest bank.
"The Finance Minister (Atis Slakteris) has indicatively said that the sum could be between 1 and 3 billion euros," said Finance Ministry spokeswoman Diana Berzina.
She stressed that the talks with the Fund so far had not been about a concrete sum.
Prime Minister Ivars Godmanis told commercial LNT television that the amount could be known after Monday, when Latvia will have presented to the Fund its ideas on the scale of an expected economic decline next year and on its policy response.
Latvia now faces the twin challenges of a large current account deficit and a rising budget deficit and its economic situation is the most difficult of the three Baltic states, all paying the price for allowing their economies to overheat.
The government has said it expects a GDP fall of 4.3 percent next year, compared with a previously forecast 2 percent drop.
Lithuania expects a 1.5 percent fall in economic growth next year and Estonia's central bank foresees a 2.1 percent drop.
Latvia's slide could push the budget gap up to 2.5 or 3 percent of GDP, Baltic news agency BNS quoted Finance Ministry State Secretary Martins Bicevskis as telling a parliament committee.
He was quoted as saying covering this would cost about 500 million lats, about another 1 billion would be needed to repay syndicated credits of nationalised second-largest bank Parex and another 1 billion for co-financing EU projects.
LAT STAYS WEAK
The local lat currency stayed at the weak end of its band against the euro, though one trader said an IMF deal would take away uncertainty that had led to speculation against it.
A sale of government debt securities was also underbid, with the Treasury selling only 7.8 million and 2.8 million lats respectively compared to 24 million lats ($43.87 million) of May paper and 16 million lats of November debt offered.
The Treasury last week resorted to a direct tap issue for the first time in order to raise funds.
Central bank interventions to support the lat have amounted to it spending more than 800 million euros to buy lats, which has also contributed to low liquidity of the currency.
That shortage in turn has meant the central bank's overnight
borrowing rate has steadily climbed and on Tuesday it lent banks
441.1 million lats under its marginal lending facility to help
liquidity
The government and central bank also denied on Tuesday that the IMF wanted a change in the lat currency peg to the euro, which would likely lead to an effective devaluation, in exchange for a loan.
The lat is pegged at a central rate of 0.7028 euros, with a 1 percent fluctuation band. The currency has been stuck for eight weeks at the weak end of the bank, 0.7098.
By 1324 GMT, the lat was quoted at 0.7087/99