The government began introducing economic reforms in 1990 to effect the transition to a market-driven economy. Individual and family-owned businesses, cooperatives, and privately and publicly held companies are now permitted. The privatization process was simplified with a 1994 law that created the Privatization Agency (PA) and the State Property Fund. Distribution of privatization vouchers was completed by March 1995, with certificates valued at Ls2.8 billion distributed to 2.2 million Latvians.
The privatization program focuses on international tenders and public offerings of shares. By mid-1994, 450 state enterprises had been transferred for privatization. The first international tender of 45 enterprises came in November 1994, followed by 80 more in 1995. Large-scale privatization began in 1996 and continued into the beginning of the 21st century, when privatization was almost complete (with the exception of large state utilities).
In 2001, Latvia negotiated a 20-month, $44-million Stand-By Arrangement with the International Monetary Fund (IMF). Real GDP growth was strong in 2001–02, led by investment and consumption. Inflation was low during those years. In 2003, per capita GDP stood around 50% above its level in 1995. Latvia's economy in 2003 was regarded as one of the best of the 10 countries slated for EU admission in 2004. The government was taking steps toward achieving a balanced budget by reducing government spending in 2003.