Government approves Latvia's 2025 draft budget

At an extraordinary meeting on Monday, October 14, the government approved the draft 2025 national budget and decided to send it to the Saeima for consideration, Latvian Radio and Latvian Television reported.

There are some decisions that are sure to be hotly debated in the Saeima, and the final decisions after two readings in Parliament could differ from what is currently supported by the government.

Firstly, the controversial transfer of the one percentage point contribution from the second to the first tier of pensions. Over the next four years, this will make up for a shortfall of around €100 million in the national budget due to changes in labor taxes. The Ministry of Welfare has commented that this decision will have no impact on future pensions.

The government has also agreed to push ahead with a plan to introduce a superprofit tax on banks over the next three years if they do not increase lending. Last week, bank representatives said that the tax would not boost lending because the economy was too slow.

The vehicle operation tax is set to rise by 10%, and excise duties on alcohol and soft drinks are set to rise slightly.

Budget revenue is planned at €15.1 billion and expenditure at €17.1 billion. Compared to this year, revenue is expected to rise by €583 million and spending by €876 million. A third of spending will be on social protection, over 10% on defense, including equipping the country's external borders and cyber security measures, and over 7% on education.

The basic budget is planned to raise €10.2 billion in revenue and €12.7 billion in expenditure. The special budget, on the other hand, is planned to raise €5.2 billion and spend €4.7 billion.

The budget deficit for next year is planned at 2.9% of gross domestic product, which would be in line with requirements, but risks being exceeded if the economy does not develop as rapidly as expected, Andrejs Jakobsons, spokesman for the Fiscal Discipline Council, said at the government meeting.

The draft laws on the state budget are expected to be submitted to the Saeima on Tuesday, October 15, and to be considered at first reading on October 30. This will be followed by the submission of proposals. These will be examined by the government and then by the Saeima in its final reading. This is expected to take place around mid-November.

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