On Wednesday, the 4th of December, Latvian Saeima passed in the final reading amendments to the budget and finances management. These amendments are planned to commence the reformation of state budget processes, as well as improve municipal financial stabilisation process.
Saeima speaker Daiga Mieriņa had prepared a proposal for the budget as well. However, the Union of Greens and Farmers later dropped the proposal and they did not receive enough support. The submitted proposal provided for reviewing the entire state and municipal budget programmes’ expenses every four years and adopting a so-called “zero budget”.
“Zero budget” would provide for a review of both state and municipal budget program expenditures. This means that expenditure should be reviewed both vertically by state and municipal authorities and horizontally by sectors, including evaluating the effectiveness of state and municipal real estate management, thus evaluating the balance of budget objectives, results and resources.
Opposition members did, however, support the proposal. Saeima deputy Artūrs Butāns said at the meeting that the state budget lacks details at the moment. Often approximate insights are submitted. “You have to write an application for every line,” said Butāns. He said it should be allowed to look into the Ministry of Finance pockets in more detail. This would help the Saeima and government work more efficiently, he said.
Opposition member Juris Viļums mentioned at the meeting that the proposal is worth supporting. “Yes, it does not solve all the problems, but it is a step forward,” he said, stressing that it would promote transparency.
The adopted amendments bring the norms into line with the European Union’s economic governance framework, as well as introduce a new approach to the reporting process, the Ministry of Finance explained.
The changes are intended to reduce the administrative burden, simplify and make the budget preparation and implementation processes more efficient. Ministries and other central state institutions will include in the explanations to the draft state budget law the policy and performance indicators to be achieved and the planned values of the indicators that are expected to be achieved with the funding granted by the State Budget Law.
The amendments to the law establish the obligation for ministries to inform the Saeima committee by the 30th of April about the operational objectives and results achieved in the previous year in accordance with the resources spent and the benefit to society.
The structure of the improved State Budget Law will be reflected in the draft law on the state budget for 2027 and the budget framework for 2027, 2028, 2029 and 2030. Until then, during 2025, the regulatory framework must be arranged, which institutions will apply in 2026 when preparing budget requests for 2027.
Further, the Government must submit to the Saeima a medium-term Fiscal Structural Plan of Latvia or its annual progress report by the 15th of April of the current year. The Minister of Finance will report on this at the Saeima sitting, including information on the macroeconomic development scenario, the fiscal policy strategy and medium-term objectives of fiscal policy, the structural reforms and investments included in the plan, as well as on possible priority development directions of the state budget.
The Ministry of Finance explains that the new regulation also determines the procedure for initiating, monitoring and terminating the process of financial stabilization of municipalities, which has been checked this year when solving the issues of financial stabilization of Rezekne municipality. Similarly, the draft law provides for the establishment of equal responsibility for the heads of municipalities for assuming obligations without an appropriation and for the implementation of the appropriation, as it is established for the heads of institutions financed from the budget.
The adopted amendments will ensure more expeditious, more modern technology opportunities and more economical financial supervision of the municipalities, where the financial stabilization process has been started, notes the Ministry of Finance.
Amendments to the Law on the Budget and Financial Management are directed in the package of draft laws accompanying the draft law “On the State Budget for 2025 and the Budget Framework for 2025, 2026 and 2027”.