If budget distribution does not prove enough to support residents and compensate inflation growth, the state may borrow money from foreign exchange markets, said Latvian Prime Minister Krišjānis Kariņš after meeting with President Egils Levits on Wednesday, 15 June.
The PM said he previously issued an order to the Ministry of Welfare to work with other ministries and develop a focused support system to be adopted soon if a need to provide emergency aid to residents appears.
Kariņš mentioned that the Ministry of Welfare did submit such a plan on 14 June. It consists of 14 different measures developed in cooperation with the Ministry of Economics. He said he plans to start reviewing the proposal from the ministry together with other ministers and social partners.
The PM said the offer has many good elements.
Proposals are currently being coordinated with ministries.
«I am certain that we will reach a comprehensive and focused support system that will help reduce the consequences of war reflected in price rise, especially in the energy sector. This task is progressing,» said the PM.
The PM said the government has yet to reach an agreement on the support plan. Currently ministers discuss support measures. These measures can be divided into two parts. The first is support for residents with low income. This support is intended to compensate the increasing everyday costs. The second part is for energy prices, which applies to a wider range of residents.
Kariņš stressed that although it is currently unknown how the market will respond and how prices could change in autumn and winter, assuming prices continue growing, the price rise could be divided between the state and residents. He explained that the state plans to take away a significant part of the possible growth to help residents and state economy.
«As the head of the government, it is important to me for decisions to be made as soon as possible and support measures are adopted as early as September,» said the PM.
The Ministry of Welfare’s offered support may cost the state approximately EUR 450 to 480 million. Kariņš stressed that this amount is possible for the entire season, not separate months. Funding sources may be two for any kind of support the government agrees upon – the first source is the growing budget revenue.
He said one of the side-effects of inflation is that the state treasury fills more rapidly than expected. Kariņš said this portion of the money could be divided to support residents. If it turns out not enough, the state may borrow money, even though borrowing is now far more expensive.
«I cannot see us increasing tax rates for residents. Our goal is not to do it. Our plan is not to increase the debt. First of all we plan to divide budget growth. If need be, we may borrow money, considering our country has a good credit rating and high international trust,» said Kariņš.
President Egils Levits also said that at first glance the Ministry of Welfare has come up with god proposals that are now have to be further clarified by the government.
He stressed that the support system should be ready by autumn, when residents are sure to receive large bills for utilities. The system also needs to be focused to make sure support is provided to residents that need it the most.