Latvia passes 2003 budget

At an emergency meeting on Feb. 28 that lasted over 10 hours, Latvia's Parliament passed the draft national budget for 2003.

The long overdue budget will have a deficit of 3 percent of gross domestic product, as pro-government lawmakers voted down all opposition proposals to raise revenue forecasts in order to allow for last-minute trading.

Prime Minister Einars Repse was emphatic about the state's intention to collect more revenues than planned in the draft budget, but he refused to make any additional allocations before the money was in the treasury.

This year's revenues are targeted at 1.6 billion lats (2.6 billion euros) and expenditures at 1.8 billion lats, resulting in a fiscal deficit of 177.5 million lats.

Last year's revenues to the national budget amounted to 1.5 billion lats and expenditures were 1.6 billion lats. The deficit in fiscal 2002 came to 98.3 million lats, or 1.8 percent of GDP.

NATO is a top priority under this year's budget, with 35.9 million lats to be allocated for integrating into the military alliance, while another 20.5 million lats are earmarked for EU integration,

Some 14.8 million lats will be spent on improving public administration.

Latvia's 2003 budget has been criticized by European monitoring organizations for its excessive deficit. A 3 percent deficit is the maximum allowable under the Maastricht criteria for European Monetary Union, and Latvia will have to meet the criteria if it wants to introduce the euro in the future.

In this regard both the Bank of Latvia's president and representatives from international financial institutions have called for a lower budget deficit.

The government, however, is already claiming that it has put together an austerity budget and that expenditures cannot be cut any further.

The government has turned down an International Monetary Fund suggestion to postpone a lowering of several tax rates in order to improve the budget situation.

Repse has said he would like the 2003 deficit to remain under 2 percent. He explained the government had not yet eliminated all deficiencies in tax collection and cut all unnecessary costs, so the actual deficit could be lower than provided for in the budget.

The budget law is likely to be enacted by President Vaira Vike Freiberga and will take effect in the first half of March.

The adoption of this year's budget has been delayed due to parliamentary elections last fall, as a result of which the new government only started working in November.