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Government trims deficit through sleight of hand

  • 2004-12-15
  • From wire reports
RIGA - The government of Prime Minister Aigars Kalvitis delivered on its promise to shore up the state's fiscal appetite, approving on Dec. 11 a trimmed down version of the 2005 draft budget.

Cabinet members managed to cut the deficit from almost 2 percent to 1.67 percent of GDP. Finance Minister Oskars Spurdzins stated that the previously planned deficit was reduced after the ministry agreed to transfer some payments scheduled for next year into the 2004 budget, thus reducing overall spending next year.

The government also approved a number of one-off payments for various items that were supposed to be executed next year and transferred them to this year's budget. For instance, direct payments to farmers this year will increase by 17 million lats (25 million euros) after payments were moved forward from next year. Another 14 million lats to be paid to the EU budget next year, as well as 2.45 million lats to the European Investment Bank, were also brought forward.

Overall, budget revenues are expected to reach 2.5 billion lats, a 25 percent increase on 2004. Spending will amount to some 2.7 billion lats, up 21.7 percent. The expected fiscal deficit is 133.5 million lats, or 1.67 percent of GDP.

Other budget parameters include a 6.7 percent increase in GDP and a 4.3 percent rise in the consumers price index.

The draft budget was likely to be submitted to Parliament this week for approval on Dec. 20. The previous draft, prepared by the ousted Cabinet of former PM Indulis Emsis, was rejected by Parliament in late October and resulted in the government's ouster. The draft had provided for an increase of revenues and spending, though sustaining the budget deficit at the 2 percent of GDP level.

In other macroeconomic news, last week the central statistics office in Latvia announced that GDP in the third quarter soared by 9.1 percent and that economic expansion over the first nine months of the year was 8.5 percent. Officials said that annual GDP growth was likely to amount to 8 percent, which would put Latvia at the top of EU countries.