Saeima passes Latvia's 2017 budget in first reading

RIGA - Saeima approved Latvia's draft 2017 budget in the first reading on Monday, forecasting budget revenues of 8.066 billion euros and expenditures of 8.367 billion euros next year.

The draft budget for next year was passed in the first reading by 57 votes in favour to 33 against, with no abstentions.

Today's Saeima meeting and debates lasted six hours with two breaks.

Opposition lawmakers criticised the budget blueprint, maintaining that it does not give hope for enhancement in areas essential to society and that the measures planned in the 2016 budget would harm small businesses. While coalition MPs were not anonymous on certain subjects, they attempted to disprove the opposition's arguments against the budget proposals.

Prime Minister Maris Kucinskis (Greens/Farmers) remarked during the debate in Saeima: "This budget is not suitable for conspicuous metaphors, its ideology is based on the coalition partners' ability and strength to agree on compromises, the willingness to take the first step towards radical reforms in many areas. We are heading into an uncharted territory, because staying put would be pointless. Let's take this first step together!"

The prime minister rejected claims that the budget lacks a strategy and applauded the government for listening to its social partners and constructive criticism.

Compared to the 2016 budget, revenues are estimated to grow by 664 million euros and expenditures by 681 million euros next year. Alterations of budget expenditures have provided an extra 60 million euros, which will be used for government initiatives and prioritised measures in various sectors. The government is determined to revise the budget regularly in the future, the Finance Ministry had previously vowed.

In 2017, healthcare funding will be boosted by 64 million euros, according to the draft budget. The increase is being provided in the context of the planned healthcare system's reform. The added funding has been secured through an agreement with the European Commission, which has permitted Latvia to increase its budget deficit by 0.1 per cent of GDP and spend an additional 34.3 million euros on the health sector.

Latvia's defense budget is expected to rise by 98 million euros in 2017, to 1.7 per cent of GDP. Latvia has committed to increasing its defense spending to 2 per cent of GDP in 2018 and 2019, according to its medium-term budget framework.

Funding for education will grow by 11 million euros next year, representatives of the Finance Ministry said, pointing out that 47.2 million euros would be provided for teachers' wage reform. The Education and Science Ministry plans to revise its budget to offer 15.7 million euros of that amount.

Financing for social protection, including pensions and social benefits, will increase by 197 million euros next year, while budget expenditure on public order and security will grow by 80 million euros.

An extra 19 million euros have been set aside in the draft 2017 budget for demographic measures. These include boosting the monthly benefit for families’ fourth and each successive child from 34.14 euros to 50.07 euros.

The minimum monthly wage will rise to 380 euros from 370 euros in 2017.

As for next year's budget revenues, 6.344 billion euros are projected to be collected in taxes, non-tax revenues are projected to reach 513.9 million euros, foreign financial assistance 1.14 billion euros, and other revenues are forecasted at 94.2 million euros.

The government plans to produce a portion of these revenues by battling the shadow economy, with new measures expected to provide 16 million euros in additional budget revenues. In accordance with the medium term budget framework, Latvia's budget deficit is planned at 1.1 per cent of GDP in 2017, at 1 per cent of GDP in 2018, and 0.7 per cent of GDP in 2019. Latvia is also planning a fiscal reserve, worth 0.1 per cent of GDP, in 2017.

Latvia's economic growth is estimated at 3.5 per cent in 2017 and 3.4 per cent in 2018 and 2019. Employment growth is forecasted at 0.2 per cent in 2017.