On Friday, September 19, the Ministry of Finance (MF) submitted an informative report to the government on the proposals of sectoral ministries and central government institutions for priority measures for the 2026 and medium-term state budget draft. The government's priorities for next year's state budget – security, support for families with children, and education – are planned to receive additional funding of EUR 565.5 million. Of this, €320.3 million is earmarked for security, €45 million for education, €94.8 million for support for families with children, and €105.4 million for other measures. Most of the additional funding for the government's priorities will be provided by reducing state budget expenditure.
“The priorities for next year’s budget are security, support for families, and competitive education. Security is not just about military equipment – it is also about the feeling that families are protected, that children have the opportunity to study at good schools, and that young people have a future right here in Latvia. It also means a stable business environment that creates jobs and drives long-term development. Support for families means not only benefits, but also affordable housing and quality education. The government must make major strategic decisions and resolve long-standing issues that make everyday life easier and safer for people and businesses. We are doing this by reducing bureaucracy, reviewing functions, and cutting costs in line with modern requirements. I am pleased with the work of our coalition partners and the agreement that has been reached," said Prime Minister Evika Siliņa.
While preparing the 2025 state budget, it was decided to reduce base expenditure in the medium term by EUR 50 million per year. Meanwhile, while working on the 2026 budget, as a result of a review of state budget expenditure, the sectoral ministries jointly identified and agreed on expenditure cuts of EUR 171 million, which were approved by the government on 26 August this year. Continuing work on next year's budget, an additional €12.4 million in spending cuts has been secured.
Thus, the total additional funding provided as a result of the reduction in state budget expenditure amounts to EUR 233 million for 2026. In turn, the medium-term reduction in state budget expenditure in 2026–2028 will total EUR 814.1 million.
“This year’s budget preparation process was not easy, especially given the upcoming elections. The most important thing is that we have been able to secure the necessary funding to strengthen the country's defense capabilities, moving towards 5% of GDP. Funding for this and other measures – family support and education, other measures in health, agriculture and other areas – has been secured by reducing base expenditure and not raising basic taxes," said Finance Minister Arvils Ašeradens.
Priority measures related to national security
Measures related to strengthening national defense capabilities and internal security are expected to receive the largest share of additional funding in 2026 – EUR 320 million (EUR 444 million in 2027, €655 million in 2028).
Given the activation of the national exception clause, the increase in defense spending can be financed by by deviating from fiscal rules, and in 2026, €296 million is planned for the Ministry of Defense to improve combat capabilities, including joint defense procurement with other countries. Of this, €10 million will be invested in equipment.
Overall, defense spending next year will amount to 4.6% of GDP according to NATO methodology, 4.9% in 2027, and 4.7% in 2028. These investments will strengthen the country's defense capabilities, increase the security of the population against external threats, and improve border infrastructure.
In turn, €3 million will be allocated to border municipalities to strengthen security.
Priority measures related to education
In addition to the priorities set by the government – support for families with children and education – additional funding of €513 million is planned in the medium term: €139 million in 2026, €179 million in 2027, and €194 million in 2028.
To improve the quality of education and introduce the "Programme at School" funding model, €45 million will be allocated from 1 September 2026. Funding is also planned to increase the number of support staff. A transition period of one academic year will be provided, which means that schools will have the opportunity to gradually adapt to the new model, maintaining the current system while preparing for change. Education is one of the cornerstones of national development and social welfare, so improving its quality is a long-term priority for the government. Support will continue in 2027 with additional funding of €90 million, and a further €86 million is planned for the program in 2028.
Priority measures related to support for families with children
Measures designed to support families with children will receive additional funding of €94 million in 2026. This includes improving material support for families with children and children in out-of-home care, maintaining parental benefits at 75% for working parents, and improving the health of mothers and children by ensuring greater access to health services and medicines. An additional €17 million will be allocated to other priority measures, including €10 million for palliative care through policy changes and €3.2 million for social rehabilitation services.
Support for families with children will continue in the coming years, with an additional €88 million in funding planned for 2027 and a further €107 million in 2028.
Additional support for working people and socially vulnerable residents
It is important to note that in 2026, various types of support will also be increased for working residents and socially vulnerable members of society. Accordingly, the non-taxable minimum will increase from €510 to €550 per month, while the minimum wage will increase from €740 to €780 per month.
From October 1, 2025, pensions will be indexed to €1,488 (for comparison, in 2024 they were indexed to €683), ensuring that 98% of pensioners' pensions will be fully revised.
From July 1 next year, as a pilot project, the value added tax rate will be reduced for one year on essential food products – bread, milk, eggs, and fresh poultry meat. Similarly, state budget support for farmers will continue in 2026, with an additional €59.3 million in funding earmarked for the sector.
Revised revenue measures for 2026–2028
In order to secure additional funding for priority measures, not only were state budget expenditures reviewed and reduced, but opportunities to increase state budget revenues were also identified. The most significant measures include dividends from state-owned companies, an increase in gambling tax rates from 2026, and stricter restrictions on harmful goods by increasing excise duties on alcohol and tobacco. Changes to corporate income tax are also planned to balance the tax burden on investors, promote access to alternative sources of financing for companies, and reduce financing costs. As a result of these measures, additional revenue is planned: EUR 65.3 million in 2026, EUR 108.9 million in 2027, and EUR 136.8 million in 2028.
It is planned that the agenda of the National Tripartite Cooperation Council meeting on 19 September this year will already include issues related to the draft state budget for 2026 and the budget framework for 2026-2028. The Cabinet of Ministers is scheduled to approve the draft state budget for 2026 and the budget framework for 2026, 2027, and 2028 on October 14 this year. The package of draft laws on the 2026 budget is scheduled to be submitted to the Saeima on October 15 this year.
The informative report is available on the Draft Legislation Portal.