Over the last ten years, not once has a reduction in expenditure been planned in the state budget, and the government has never been able to plan the budget realistically. Every year the state has spent 1.5 to 3.6 billion euros more than was planned when preparing and adopting the state budget, according to data from the Saeima, the Ministry of Finance and the State Treasury.
The Cabinet of Ministers is once again preparing to submit Latvia’s state budget for 2026 to the Saeima. Social partners are literally shouting about the need to cut spending, but are not being heard. As always, the government promises to find ways to save, but so far only boasts that it has found options to save an average of 150 million euros a year over the next three years. Why will this achieve nothing? Inc. looked back over the last ten years – a period that has included both crises and more stable times when “there is more money than ever”. The conclusions are not encouraging – the politicians in power still want to go on living beyond their means.
The data show that not once has the government even planned to reduce expenditure – it has always planned increases averaging 200 to 700 million euros a year. For example, in 2015, compared with 2014, state budget expenditure increased by 200 million euros, but already a year later the planned increase was 700 million euros. Another year on – an increase of 600 million, but when the 2018 elections approached, the pace of planned expenditure growth slowed and they were planned to be only 400 million higher than the year before. Taking into account inflation and the need to spend money on infrastructure, the planned increases in expenditure do not even sound that large: from 2015 to 2019 they grew by 5–9% in percentage terms. However, the problem lies elsewhere – the government has never stuck to its plans and every year has overspent the planned amount by an average of 1.5–2 billion euros, stubbornly refusing to revise its planning (see chart).
When 2020 arrived, as the Covid-19 pandemic began to rage around the world, expenditure increased far more sharply. For example, when planning for 2021, the government projected that state expenditure would increase by 2 billion euros in a single year, by 2.2 billion euros in 2022 and by 1.8 billion euros in 2023. Yet once again the plans did not materialise. These already large planned increases in expenditure resulted in actual increases of 3.6, 3.3 and 2.2 billion euros per year, respectively.
As the pandemic subsided, expenditure growth apparently also fell: in 2024, when planning the 2025 budget, an increase of “only” 800 million in expenditure was planned, but in reality this was overspent by a factor of two, with not 800 million euros more being spent than the year before, but 1.68 billion more than the previous year. Where does the state get this money? It borrows it, of course, as we can see from the public debt figures.
Now, in presenting the budget for the coming year, the planned expenditure in it (already after the government’s “savings”) is still intended to be 600 million higher than the previous year. If the Ministry of Finance indicates that 150 million euros will be saved each year, this means that the original plan was to increase expenditure by 750 million, but now the increase will be only 600 million euros. How much we will actually spend – we will see in 2027, but given the ten‑year trend, most likely no savings are to be expected.
Originally published at https://inc-baltics.com/valsts-budzets-desmit-gadu-laika-ne-reizi-nav-bijis-pat-planots-budzeta-izdevumu-samazinajums-2/
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