Over the next three years, Latvia’s public sector will need to review its expenditures by at least 450 million euros, Finance Minister Arvils Ašeradens stated during an extraordinary session of the Saeima on the 8th of May. Meanwhile, an even larger sum—over 500 million euros—represents unused European Union (EU) funding from the previous year. Does the minister’s statement signal the end of an era of wasteful government spending? BNN asked Filips Rajevskis, political analyst and co-owner of the media consultancy Mediju tilts.
According to Rajevskis, two key points must be addressed. The bad news: the situation is indeed serious, and funds are lacking. The good news: political awareness has emerged, with growing recognition that the problem must be tackled directly—rather than hoping for a miraculous surge in tax revenue or an economic boom that solves everything.
“Overall, this is a positive sign that fiscal reason is making its way into mainstream politics,” Rajevskis said in response to Ašeradens’ comments.
When asked whether the minister’s remark that “the state is currently not a good buyer, and we want to change that” suggests stricter oversight and potentially fewer public procurements, Rajevskis acknowledged that while there may be fewer procurements, the real problem lies elsewhere. The procurement process, he explained, is deeply convoluted and burdened with bureaucracy, which drives up administrative costs and makes tenders unattractive to businesses.
“Entrepreneurs are reluctant to offer competitive prices due to the excessive administrative burden and the risk of becoming entangled in bureaucratic red tape after the deal is signed,” he explained. This issue, Rajevskis noted, applies not only to state procurement, but also to the absorption of EU funds. “We’re paying too much on one hand and failing to use available European funding on the other.”
BNN also asked why no public officials have been held accountable—or punished—for the failure to absorb EU funds, despite some continuing to receive bonuses, salary increases, and other benefits. Rajevskis pointed to the same issue: the administrative burden.
“Entrepreneurs are deciding it’s better not to apply for the funds at all because they cause more trouble than they’re worth. One thing is what someone with a serious face says about how great a program is for Latvia’s development; another is the reality—many programs simply don’t function as intended and fail to meet the expectations of entrepreneurs.”
He added that there is a widespread inability among institutions to “step into the shoes” of the entrepreneurs they’re meant to support. “Programs are often designed to look good on paper, with emphasis on the convenience of monitors and supervisors, but rarely are they tailored to make it easy, attractive, or worthwhile for businesses to participate,” Rajevskis concluded.
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