President promulgates 2026 state budget

RIGA - President Edgars Rinkevics has promulgated the 2026 State Budget Law, and the budget framework for 2026, 2027 and 2028, according to a statement in the official government gazette Latvijas Vestnesis.

The Saeima adopted Latvia's 2026 budget in the final reading on December 4.

Budget revenue is projected at EUR 16.1 billion, expenditure at EUR 17.9 billion, and a deficit at 3.3 percent of gross domestic product (GDP).

The budget bill passed the second and final reading in parliament by 52 votes to 42.

Saeima also adopted in the final reading all 47 bills accompanying the 2026 state budget law.

A total of 290 proposals were submitted for amending the Law on the 2026 State Budget and the budgetary framework for 2026-2028. Only a few proposals submitted by opposition MPs were supported by Saeima Budget and Finance Committee.

These include amendments to the Law on State Social Benefits, providing that childcare allowance will now be paid until the child reaches the age of 1.5 instead of the current two years. This allowance is to be increased from EUR 171 per month at present to EUR 298 per month for a child up to one and a half years of age. For children born before November 2 next year, the allowance will continue to be paid until the child reaches the age of two.

The changes will also affect the family state allowance for children in education. It is planned that a child aged 16 to 20 will also be able to receive the allowance if he or she is attending college or university full-time and is not married. This will allow families with young people at university or college to renew the allowance until the age of 20. Currently, the allowance is paid for children in secondary or vocational education.

The one-off childbirth allowance will also increase from next year to EUR 600. At present, it is EUR 421.17.

Saeima has also adopted amendments to the Value Added Tax Law, introducing a reduced rate of value added tax of 12 percent for certain basic food products from mid-2026.

The amendments were adopted to mitigate the impact of rising food prices on people's welfare. The changes to the value added tax regulation are linked to the draft law on the state budget for 2026 and the budget framework for the next three years.

A reduced VAT rate of 12 percent is planned for rye, wheat, mixed flour, and gluten-free bread, including pasteurized or frozen bread. The reduced tax will not apply to pastries, pies, croissants, and other bakery products, as well as shortbread, rusks, toast, breadcrumbs, and breadsticks.

The reduced VAT will also apply to fresh, sterilized or pasteurized milk from cows, sheep, or goats, but will not apply to ultra-sterilized milk, condensed milk or evaporated milk.

The reduced VAT will also apply to fresh and chilled poultry. The reduction is not applicable to frozen meat.

The 12 percent VAT reduction will also apply to fresh - uncooked - poultry eggs in shell.

The reduced VAT rate on foodstuffs is to apply from July 1 next year until June 30, 2027.

As reported, the government on October 14 approved Latvia's 2026 draft budget, with consolidated state budget revenue planned at EUR 16.064 billion and expenditure at EUR 17.945 billion.

Compared to the 2025 budget, the increase in state budget revenue in 2026 exceeds the increase in expenditure. Budget revenue is projected to increase by EUR 944.6 million year-on-year, while expenditure is projected to grow by EUR 804.3 million.

The government basic budget is planned to raise EUR 10.9 billion in revenue, while expenditure in the basic budget is projected at EUR 13.2 billion. The special budget, on the other hand, is planned to receive EUR 5.5 billion in revenue, while expenditure in the special budget is planned at EUR 5.1 billion.

Latvia's gross domestic product (GDP) next year is forecast at EUR 43.953 billion, so the budget deficit will be 3.3 percent of GDP and public debt will not exceed 55 percent of GDP.

General government spending will fall to 47 percent of GDP next year, down from 47.5 percent this year. At the same time, defense spending will increase, whereas total spending will decrease.

The Finance Ministry notes that the 2026 state budget and the medium-term budgetary framework for 2026-2028 have been prepared in line with European Union (EU) and national fiscal rules.

Next year's budget includes additional investment in national security, support for families with children, and quality education. The budget also provides for more than EUR 1 billion in EU funds, as well as a EUR 151.4 million increase in local government revenues, strengthening the resilience of the state and society, the Finance Ministry notes.