Latvian government pledges responsible spending next year

RIGA - Latvian Prime Minister Ivars Godmanis has said that financial discipline will have to change significantly next year, and that ministries will only be able to spend money that is in the budget.

From January 1 next year there is a regime set that only the money that has come to the budget can be spent. If revenues are below the target, the budget will have to be cut.

He said that ministers will monitor revenues each week and from early next year the ministries will have to save up 10 percent of allocated funding.

The Latvian government at a closed meeting earlier this week agreed that reserves should be built from budgets of all ministries at the beginning of next year. Latvian Finance Minister Atis Slakteris told the press that this meant than in January and possibly during the entire first quarter of 2009 the ministries would be able to spend only 90 percent of the funding allocated to them.

He said that such "safety pillow" was necessary, if the budget revenues fell short of the target at the beginning of the next year.

The finance minister said that it was also decided to set up a supervisory committee for salaries and a supervisory committee for fiscal discipline which would monitor the budget revenues and expenditures on a weekly basis.

Revenues to the 2009 budget are planned at 4.407 billion lats (EUR 6.27 b) and expenditure at 5.146 billion lats, cutting the revenue targets by 16.3 percent or 912 million lats and expenditure by 2.1 percent or 419 million lats as compared to 2008. The budget deficit next year is planned at 739.4 million lats or 4.9 percent of GDP.