Latvia's 2021 budget plan delivered to Saeima

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Finance Minister Jānis Reirs (New Unity) handed in his budget plans for 2021 to the Saeima October 14.

As is customary, the proposed budget was contained in an old leather briefcase.

The battered budget bag


Carrying a budget portfolio from the Ministry of Finance to the Saeima is a tradition started in 1997 by then-Finance Minister Roberts Zīle. The briefcase is the same one Zīle used back then - hence its well-worn appearance.

A brass plate on the bag recorded the names of each Finance Minister making use of it and the years in which they delivered a budget to Saeima, though this was recently replaced with a new one as the first was full up (it can now be seen fixed on the back of the bag, giving it a rather bulletproof look).  

A similar tradition takes place in the United Kingdom when the Chancellor of the Exchequer (the UK Finance Minister) delivers a budget to the Houses of Parliament.

The bag has seen plenty of changes over the years through boom and bust. In the first year it was delivered to the Saeima, the amount of expenditure it outlined was a mere 1.3 billion lats or about 1.8 billion euros. In contrast the 2021 budget expenditure is more than 10 billion euros.

When it arrives at Saeima it typically weighs in at 3 to 5 kilos, depending upon the amount of paperwork inside.

The current Minister, Janis Reirs, will be carrying the portfolio for the fifth time, breaking the record of Finance Ministers Oskars Spurdzins and Andris Vilks who toted the bag four times each.

Only one Finance Minister has abandoned the bag on its annual outing - in 2008 Atis Slakteris was abroad when the budget was delivered. The bag never forgave him for the snub and a massive recession followed.

The Cabinet of Ministers on Tuesday approved Latvia's draft budget for 2021, projecting a budget deficit of EUR 1.2 billion, or 3.9 percent of GDP. 

According to the draft law on Latvia's 2021 budget, consolidated budget revenue is planned at EUR 9.579 billion, down EUR 328 million from this year.

Next year's budget expenditure, meanwhile, is projected at EUR 10.758 billion, which is an increase of EUR 744 million against this year's budget expenditure. 

According to the draft law on the medium-term budget framework, Latvia's budget expenditure is planned at EUR 9.27 billion in 2022 and EUR 9.17 billion in 2023. 

Latvia's GDP forecast (at current prices) for 2021 is EUR 30.02 billion. In 2021, the general government budget deficit can widen to 3.9 percent of GDP.

Maximum government debt can grow to EUR 14.44 billion and local governments are allowed to increase their loans by a total of EUR 268.12 million by the end of 2021.

Under the budget bill, 75 percent of personal income tax revenue will go to local governments' budgets and 25 percent to the central government budget. The local governments' share is estimated at EUR 1.34 billion. 

Jānis Reirs delivers 2021 budget
Jānis Reirs delivers 2021 budget

Earmarked subsidies to local governments, mostly for teachers' salaries, are planned at EUR 405.08 million. Government budget subsidies to local governments are planned at EUR 199.34 million, including EUR 198.68 million to the financial equalization fund. 

According to the draft law on the medium-term budget framework, Latvia's fiscal reserve is planned at 0.1 percent of GDP for 2021, 2022 and 2023.

Asked about the budget for 2021 on LTV shortly before delivering the budget plans, the Minister of Finance said that no budget development process is easy. "This year was no exception," Reirs said.

Disgruntled members of the arts sector, unhappy with planned changes to the law on royalties, staged a small demonstration outside the Saeima building.

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