This week has been marked by announcements about rising fuel prices and warnings that they could even double. Political analyst Filips Rajevskis, co-owner of the media company Mediju tilts, told BNN that the issue goes far beyond fuel alone. Due to the war in the Middle East, gas prices are also expected to increase, which will inevitably lead to higher heating costs.
“Thank God it is already spring,” the political analyst noted, though he added that the overall outlook remains worrying.
“As a country we are living in a situation of a very high deficit, and the state budget was extremely difficult to draft. We keep borrowing money and constantly hear that everything will be fine. Critics, however, say the opposite – that in a crisis we will not have the financial ‘safety cushion’ needed to soften the impact,” Rajevskis said.
According to him, the debate about this issue took place in December during the adoption of the state budget, but it quickly faded from public attention once the budget was approved.
Rajevskis explained that
the first crisis came from the unexpectedly long and cold winter, which led to significantly higher utility bills for households.
“People suddenly faced very high communal service costs. The government then began debating how to support those who needed help. It was a difficult debate – some support was provided, but overall it looked like in times of austerity it was easier not to support everyone who should be supported,” he said.
“No one could have predicted a war in the Middle East, but it has happened. Gas and fuel prices are rising, and this will increase transportation, logistics and energy costs. Energy in Latvia is produced both from hydropower and gas, so higher gas prices affect the whole system,” Rajevskis explained.
According to the analyst, rising energy costs will once again create pressure to provide support to the most vulnerable social groups.
“But how can we support them if the state is already living on borrowed money and operating under the assumption that we do not need a financial cushion because nothing bad will happen? In the end, we will once again have to search for funds from the budget for unforeseen circumstances or borrow additional money,” he said.
Rajevskis also criticised what he described as an overly relaxed fiscal policy approach during the budget debate.
“Supporters of a very relaxed fiscal policy argued that spending cuts should be slow and carefully considered. In reality, that often means not cutting spending at all because everything supposedly seems fine. As a result, the state does not have a real financial ‘cushion’ to help its citizens during crises,” he said.
Asked what should be done now, Rajevskis said action should have been taken already in December.
“Even now, the government must seriously review state spending, return to stricter fiscal discipline and reduce expenditures so that the country has the capacity to support its most vulnerable citizens. We need that financial cushion instead of constantly borrowing and spending money, leaving behind only debts and interest payments,” the analyst concluded.
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