Budget watchdog urges Latvian government to curb economic stimuli

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The Fiscal Discipline Council (FDP) called on the government to limit the implementation of additional economic stimulus measures, according to it latest crisis monitoring report published October 7.

In the report, the Council indicated that Latvia's priority in mitigating the effects of COVID-19 is rapid and efficient use of the European Recovery and Stability Mechanism over the next two years, providing a unique opportunity not only to mitigate the effects of the pandemic, but also to contribute to economic breakthrough.

In general, although the Council welcomes the government's work in overcoming the COVID-19 crisis, in earlier monitoring reports, the Council has repeatedly called on the government to limit the creation of additional economic stimulus measures.

The Council said that aid financed by the State budget must be more selective, targeted and with the quickest possible economic effect. State investment projects should, first of all, contribute to Latvia's economic potential development, productivity growth and competitiveness, according to the Council.

Regarding the Recovery and Stability Mechanism, the Council said that the use of this money should follow the priorities identified by the European Union (EU), which include:

  • promoting the EU's economic, social and territorial cohesion;
  • strengthening economic and social sustainability;
  • mitigating the social and economic impact of the crisis;
  • supporting green and digital transformations.

The Council said that the use of this instrument is unlikely to worsen the state budget situation and would not increase public debt.

“The resources of the recovery fund are a very valuable resource, but they will only bring an economic breakthrough to Latvia if the money is invested effectively.

Therefore, the FDP stresses again and again that it is important to ensure that this money does not turn into some infrastructure projects – buildings, roads, etc. The use of money must be clearly targeted and bring about a rapid return on gross domestic product and additional budget income. Let it be clear where and according to which criteria the money is invested,” said Inna Šteinbuka, Chair of the FDP.

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