Experts warn about imbalance risk in Latvia’s budget

Latvian government has taken on major expenditure commitments that do not have sufficient coverage in state budget plans. This could create heavy choices for the 2019 budget compilation, as well as problems for political parties when it comes to implementation of priorities during the government formation process, says Fiscal Discipline Council.

One particularly problematic aspect is compilation of a budget under deficit conditions and rapid economic growth. There is a high risk of having to either reduce budget expenditures or increase tax burden to compensate the imbalance, BNN was informed by the Fiscal Discipline Council.

On Thursday, 29 November, the council held a meeting and discussed the matter on proposed amendments to the Law on Budget and Financial Management. Members of the council also discussed fiscal development perspectives.

As it is known, Saeima’s Budget and Finance Committee has started viewing proposal for amendments of the law, mainly in relation to temporary budget regulations.

Fiscal Discipline Council proposes complying with maximum budget expenditure volumes approved in the medium-term budget plan for 2018, 2019 and 2020. Any increase of expenditures for pensions, benefits and wages not included in the medium-term budget plan needs to be completely compensated with reduction of budget expenditures on other state budget positions, experts warn.

On Thursday, 29 November, Latvian Saeima supported in the first reading amendments to the Law on Budget and Financial Management to guarantee financing for decisions made by the previous Saeima, including larger pensions and benefits.

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