Bank of Latvia: Latvia's growing debt will cause tax raises

The Latvian government is still running a budget deficit, and the public debt is only growing. That's why there'll inevitably come a need to raise taxes, head of the Monetary Policy Department at the Bank of Latvia Uldis Rutkaste told Latvian Television Thursday.

He criticized the budget - which has a deficit of 1% - adopted by Saeima in the first reading. The same deficit is projected for the next year's budget.

"Public debt is growing, and we need to think how we'll be repaying it. It's clear that income from taxes will have to be increased. And it's all taking place in a situation when we're seeing turbulence in foreign markets, and the situation is unstable, creating extra uncertainty that slows down investment," Rutkaste argued against retaining a budget deficit.

While executive director of the Foreign Investors' Council, Ģirts Greiškalns, said that the investment rates in other countries aren't that good as well, due to the geopolitical situation.

"The only free funds are flowing from the markets of China and Asia, and it's there we should direct our attention," he said.

The Parliamentary Secretary for the Ministry of Finance Arvils Ašeradens said that the next year's budget is a 'defense budget'. He said that labor productivity is low in Latvia, so the next ten years could become years of 'improving labor effectiveness', and that many reforms would have to be implemented during that time.

While the head of Latvian Employer's Confederation Vitālijs Gavrilovs said that for welfare growth and attracting investments 'stable rules of the game' are needed. That is, the government has to stick to its promises and guarantee a foreseeable tax policy.

As reported, on November 3 the 2016 budget was adopted by the parliament in the first reading. 

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