Government approves raising defense spending to 3% of GDP by 2027

RIGA - The government on Monday approved draft amendments to the Law on Financing National Defense providing for raising defense spending to 3 percent of the country's GDP by 2027 with the aim to ensure a faster development of national defense service. 

The amendments provide for a gradual increase in funding for national defense to 3 percent of the projected gross domestic product for that year by 2027.

In line with NATO guidelines, Latvia has been allocating no less than 2 percent of its gross domestic product to defense since 2018. This year, national defense funding amounted to EUR 986.83 million, or 2.25 percent of Latvia's GDP. In 2024 and 2025, the defense budget should reach 2.4 percent and 2.5 percent of the GDP forecast for the respective year.

Given the current geopolitical situation and developments, it is necessary to strengthen the country's defense capabilities by ensuring a faster introduction of the national defense service, while at the same time not reducing funding for the development of the National Armed Forces (NAF).

This requires a gradual increase in defense funding beyond 2025, with no less than 2.75 percent in 2026 and no less than 3 percent of the projected gross domestic product in 2027 and beyond. This means that, based on GDP projections, EUR 1.2 billion could be allocated to defense in 2025 and EUR 1.4 billion in 2026. For 2027, the estimated defense funding will be known next year when the national budget is prepared.

The calculations are based on the report "On forecasts of macroeconomic indicators, revenue and general government budget balance for 2024, 2025 and 2026" adopted by the government on August 15, 2023.

The amendments to the Law on Financing of National Defense still need to be reviewed and approved by the Saeima.