RIGA - The Latvian government has adopted a 2009 budget that allows a deficit of 1.85 percent of gross domestic product and incorporates wage freezes and job cuts, despite protests from trade unions and other groups.
Revenues to the central government's consolidated budget are projected at 5.46 billion lats (7.77 billion euros) and expenditures at 5.79 billion lats. The budget was drawn up according to predictions that the Latvian GDP will grow 2 percent, consumer prices will rise 7.6 percent and unemployment will reach 8.1 percent.
The press service of the Finance Ministry noted that the budget incorporates a number of measures aimed at boosting the efficiency of state institutions. Budget funding for ministries was slashed by 10.67 percent, saving 136.8 million lats.
Prime Minister Ivars Godmanis said the decision to adopt the budget was a difficult one, especially taking into account the protests of trade unions against plans to freeze wages for the entire public sector next year. The number of employees in state administration will be reduced by 10 percent by the end of next year, which means that 2,419 jobs in civil service will be cut.
"Currently, the economic slowdown in the world has reached a global scope, and it is important what measures each country is taking to ease this impact. Next year's budget has been drawn up with a deficit, which is one of stimulating fiscal instruments," Latvian Finance Minister Atis Slakteris said in a statement to the press.
Slakteris said the absorption of EU funds for social programs was also a priority in the 2009 budget. "For instance, 2.7 million lats have been earmarked in the budget to raise the minimum monthly wage from 160 lats to 180 lats from Jan. 1, 2009," Slakteris said.
Overall, 926.9 million lats have been allocated in next year's budget for the absorption of EU funds 's16 percent of the total expenditures of the consolidated budget and an increase of 336.4 million lats. The basic budget includes 3.1 million lats to raise monthly social benefits to the disabled from 50 lats to 75 lats, and 2.3 million lats will be used to provide support to families raising children with disabilities.
The steepest increase in funding is planned for the indexation of retirement pensions and additional payments to old age pensions.
Revenues to the government basic budget in 2009 are planned at 3.697 billion lats and expenditures at 4.251 billion lats. Increase of expenditures to the government basic budget as compared to the planned expenditures in 2008 is 200.1 million lats, or 4.9 percent.
The government special budget is estimated to have 1.781 billion lats in revenues and 1.557 billion lats in expenditures, with expenditures rising by 336.4 million lats, or 27.6 percent, as compared to the planned budget in 2008.
The new government budget is expected to take effect Jan. 1, 2009, the ministry said.
The budget also contains additional allocations for projects begun in the previous years. Thus, 21.6 million lats have been earmarked for Latvia's defense, security and NATO integration program, 12.9 million lats for contributions to the European Community budget, and 68.9 million for the management of government debt. In addition, 67 million lats has been set aside for pay raises for teachers; 22.3 million lats for the construction of the national library; 2.6 million lats for subsidies for the airports of Liepaja and Ventspils; 1 million lats for creating jobs at the administrative regional court; 1.2 million lats for preparation work for censuses planned in 2010 and 2011; and 1.5 million lats for providing free meals to first-grade students.