Budget prescription calls for more pain

Jun 30, 2010
From wire reports

LEVEL PLAYING FIELD: Latvia’s so-called oligarchs continue to damage the economic health of the country, says Janis Platais.

From wire reports, RIGA

In order to achieve consolidation of next year’s budget by 400 million lats (571.4 million euros), cuts will be necessary in the social sector, said IMF and World Bank consultant Janis Platais in an interview with the business daily Dienas Bizness, reports Nozare.lv. “I do not think it will be possible to get by without spending cuts in the social sector. In fact, it is precisely this sector which is the largest recipient of budget funding. There is still a possibility of cuts in each of the sectors which receive funding from the state budget. The head of the government after the next elections will be assessed by how successfully he manages to work with fewer resources - whether or not he manages to work efficiently,” stressed the consultant.
Platais believes that cuts are possible in all sectors, despite the Constitutional Court’s decisions regarding pensions. The question is whether this process can be drawn up in a legally proper way so that proper communication with people is carried out concerning such steps.
“It must be understood that the state will have less tax revenue at its disposal than previously. Therefore, the only possibility is to spend less on pensions, healthcare, education, culture. Of course, pensions could be kept at the current level, but in such an event there would be a lack of money for healthcare. This could be compensated by giving up reduced VAT rates for medication. In any case, everyone will have to suffer. Moreover, Latvian legislation states that pensions should be indexed. Therefore, in accordance with the law, if prices decrease, then pensions can be indexed with a minus sign,” explained Platais.
Assessing reforms to state structures, the consultant admits that there are many problems which have not been solved. “People’s self interest often takes precedence over honesty in various procurement procedures. I am pleased that recently such matters have more often been falling into the sphere of interest of the Corruption Prevention Bureau. I think this will also be one of the most important areas for the government to think about in the future. The influence of several oligarchs has been a significant limitation on free competition and therefore on the development of Latvia as a whole. Fair competition and eradication of the plundering of state resources will have extremely great significance in Latvia’s exit from the current crisis,” he claims.
Platais indicated that reforms in the state sector have been minor, and the reason for this is the unwieldy governing coalition. For example, concerning the matter of reduction of the number of ministries, at one point it was said that this would take place, and the next moment it was indicated that it would not occur after all. o

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