Government addresses medium-term development plans

RIGA - The government on Feb. 9 agreed on the measures that would be carried out in order to ensure the fiscal consolidation of the state budget over the next two years, reports news agency LETA. The government’s decision foresees that by May 25, the Ministry of Finance in cooperation with the Bank of Latvia and the Ministry of the Economy will prepare a medium-term macro-economic development and fiscal policy framework for 2011-2013. It is planned that this document will be examined by the government’s Reform Management Group by June 18 and then forwarded to the government.

The Ministry of Finance should evaluate the macro-economic development and income forecasts presented by the framework by Oct. 15, and these should then be implemented, where necessary.
Four months after the confirmation of the new government, the Cabinet will take a decision concerning the feasible level of fiscal consolidation for the 2011 and 2012 state budgets, and the ministers will decide on the maximum permissible amount for total expenditure. By March 5, the Ministry of Finance will prepare the basic expenditure calculations for 2011 and 2012 and consult with the Cabinet regarding these. By March 31, these basic expenditure levels will be entered into the ministry’s database according to defined functions.

From April 1 to May 14, meetings are planned between the ministry and the social partners in order to ensure the evaluation of various functions. The evaluation process will be completed by Aug. 16 in cooperation between the ministry, social partners, and representatives of the ruling coalition. At the same time, the government has given the Ministry of Finance until April 1 to prepare proposals for measures which would ensure the reduction of the shadow economy, and until July 1 to design proposals for long-term tax policy reforms. By July 1, the ministry should also prepare the bill on Fiscal Responsibility.

The State Chancellery should prepare proposals by Sept. 1 for the continuation of structural reforms in the public administration, while the Defense Ministry should develop a strategy for future activity in the defense sector, by Oct. 1.
According to Finance Minister Einars Repse (New Era), preparations for the 2011 budget will go ahead, although the policy decisions will have to be approved by the next government. The minister stressed that the next two state budgets will have to reduce the deficit by 800 - 900 million lats (1.1 billion euros – 1.2 billion euros), the largest part of which will have to be done with the 2011 budget.