Austerity measures will be necessary - PM Silina

RIGA - Austerity measures will be necessary to provide funding for solving demographic issues, bolstering security and education, Prime Minister Evika Silina (New Unity) said Wednesday in an interview on the 900 Seconds program of TV3 channel.

Silina indicated that this past June the government already discussed possible austerity solutions for the coming year. The prime minister said that budget forecasts are usually released at the beginning of August, and the latest estimates on tax revenue and budget execution have been released this week. The Finance Ministry's analysis is still being awaited in order to objectively assess whether the situation had improved or deteriorated. Initial assessments suggest that the situation is slightly better than usual, but that austerity measures will be necessary.

The prime minister said that spending reviews are useful because they allow to assess how public money is being spent and to look for more efficient solutions. Silina compared this process to the management of a family budget, where it is also possible to find ways to spend smarter. She therefore plans to meet with ministers to discuss how to implement key plans such as demographic measures, education programs and strengthening security.

Silina stressed that these objectives have not changed and will require additional funding, which has to be found in the existing budget, not through borrowing.

Silina noted that emotions run high in society and in various organizations, and there are often calls to look elsewhere for budget cuts. Each sector feels that it cannot cut any costs, although the largest funds are often found in capital companies and services. The prime minister therefore stressed the need to look at the functions and efficiency of the institutions.

Silina added that she did not want to reduce the range and quality of services available to citizens, especially in health care, but that public administration would have to look for ways to streamline operations.

As regards service pensions, Silina said that that this system is partly a Soviet legacy. She cited the analysis carried out by the Saeima which concluded that the situation varies across European countries - service pensions are often granted as compensation for occupational diseases. At the same time, she stressed that those who are currently entitled to a service pension will not be deprived of it. However, she pointed out that the system would have to be reviewed in the future, as salaries have risen significantly in recent years and the budget for service pensions has been growing rapidly.

At the same time, Silina acknowledged that new demands are being made - for example, farmers are now facing a state of emergency and need contingency funds. She pointed out that climate issues also need to be addressed at the European level, which Latvia cannot ignore. She stressed that her government is ready to address all these issues.

As reported, Latvia's budget has three priorities for next year - defense and security, demography and education.

As reported, according to the mandate given by the Cabinet of Ministers, the public sector must be made more efficient and general government spending must be reduced by no less than EUR 450 million in the period 2026-2028, including no less than EUR 150 million in 2026.

The efficiency gains and expenditure reductions is to be channeled primarily to defense and security expenditure, through a combination of domestic fiscal measures and international loans. In addition, the Cabinet decision stipulates that the increase in defense financing will be made in such a way that the general government debt does not exceed 55 percent of gross domestic product (GDP).