Cabinet backs budget plan

At a special sitting of the Latvian cabinet on Saturday, ministers approved budget spending plans for next year.

The central government budget, which will be the first one under new Finance Minister Janis Reirs, in total is worth €4.28bn in 2015, compared to €4.04bn in 2014. 

According to a government schedule, the draft budget will be presented to the European Commission and Eurogroup for approval, most likely on November 26, before being sent to the Latvian parliament for its first reading and what are likely to be lengthy debates about its merits and any possible amendments.

As a member of the eurozone, Latvia is obliged to submit its budget plans to fellow members well in advance.

However with the government commanding a comfortable majority with 61 seats out of 100 in parliament, the final budget is likely to look very similar to the draft version, which raises spending by around €240m compared to this year.

Of that amount, the defense budget rises most, by nearly €39m, as a result of Latvia's pledge to spend at least 2% of GDP on defense by 2020.

Education receives an extra €31m, but only €3m goes towards raising teachers' salaries. The ministries of Agriculture and Transport receive similarly-sized spending increases of around  €31m each.

In contrast the Culture Ministry will get a mere €3.7m increase "to properly prepare the Latvian state to mark its centenary, as well as to pay cultural workers' wages." 

Both the Economy Ministry and the Environment and Regional Development Ministry actually see their budgets slashed by €10m.

The plan is based upon revenues equivalent to 33.6% of GDP and expenditures of 34.6% of GDP, meaning a small 1% deficit will be racked up - the maximum limit permitted under eurozone measures to put state finances in order.

"The new government has taken robust decisions on the 2015 budget," Reirs said in a Finance Ministry statement, though he admitted their was enoough "fiscal space" for "additional budget expenditure measures in a number of key sectors of the economy."

However, all measures would meet the government's commitment to the "fiscal discipline" measures pioneered by his predecessor, Andris Vilks.

The budget will be submitted to Saeima on 10 December, the Finance Ministry said.

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