On Tuesday, 26 August, the government reviewed and approved the Ministry of Finance's (MF) informative report on the state's basic budget and special budget base and the results of the expenditure review for 2026, 2027, 2028 and 2029. As a result, public sector expenditure will be reduced by a total of EUR 479 million over the three years from 2026 to 2028. This report implements the decision of the Cabinet of Ministers (CM) of 13 May this year, which set the task for the public sector to review expenditure and prepare proposals for reducing it by at least EUR 150 million in the 2026 budget. This would allow cumulative savings of up to EUR 450 million over three years. This is a unified government action aimed at sustainable and responsible public finance management.
The report confirms that the government's task of ensuring a €150 million reduction in public sector expenditure in 2026 has been fulfilled. At the government meeting on 19 August, the FM's updated forecasts for the general government budget balance and fiscal space for the coming years were reviewed. Fiscal space was initially estimated at EUR 39.7 million under unchanged policies. However, when the sectoral ministries jointly identified and agreed on expenditure reductions of EUR 171 million, the fiscal space for 2026 increased to EUR 210 million.
"The proposals for reviewing the expenditure of all sectoral ministries have been compiled and discussed, and we have submitted additional solutions to achieve the expenditure reduction set by the government – EUR 171 million in the 2026 budget and a total of EUR 479 million in the medium term. Expenditure efficiency is an important step in the budgetary process, which will improve fiscal space and find new resources for society and national priorities in the coming years. The most active phase of budget preparation has begun, and discussions on additional measures and structural reforms are continuing," said Finance Minister Arvils Ašeradens.
In preparing the draft state budget for 2026 and the budget framework for 2026–2028, the personal income tax (PIT) forecasts have been updated assuming no policy changes, and it has been found that the tax reform has been implemented with better results and its impact on local government budgets is much lower than initially forecast. This makes it possible to adjust the state budget subsidy by EUR 58 million in 2026, EUR 62 million in 2027, and EUR 57 million in both 2028 and 2029. Taking into account the changes made, local governments are projected to see a 6.7% increase in personal income tax revenue in 2026 and around 5% per year in subsequent years, assuming no policy changes. In addition, PIT revenue forecasts are 100% guaranteed.
It is also planned to freeze the salaries of elected officials in 2026, which will save EUR 4 million. There are also plans to reduce funds for increasing the remuneration of direct public administration institutions by EUR 6 million, as well as other additional measures.
At the same time, independent institutions were invited to join forces with other public administration institutions to assess opportunities for submitting proposals for streamlining and reducing their administrative expenses, offering structural solutions with a positive long-term effect. In response to the FM's call, independent institutions have submitted proposals to reduce expenditure by EUR 1.2 million in 2026, EUR 2.5 million in 2027, 4.1 million euros in 2028, and 4.2 million euros in 2029.
In accordance with the state budget preparation schedule, the FM was tasked with conducting a horizontal review of state budget programs. Accordingly, an analysis of the under-spending of 250 basic function programs and sub-programs and an assessment of the impact on the 2026 budget were carried out. The results show that 13% of these programs were fully spent. In 12% of cases, insignificant under-spending was found.
In addition, an assessment of the priority measures for which funding was allocated was also carried out. The analysis was carried out by assessing flexibility, effectiveness, relevance, public interest, and the role of government. A total of 208 priority measures were reviewed, of which 48 were identified as having the potential for reallocation of resources to more pressing ministry needs. As a result of the review of priority measures, the potential resources amount to EUR 14.1 million for 2026, EUR 13.4 million for 2027, EUR 13.2 million for 2028, and EUR 13 million for 2029.
The centralization of government functions and services is also essential for improving the efficiency of budget expenditure. Since the beginning of 2025, a number of institutions have already been receiving centralized accounting and personnel administration services, and this process will continue on January 1, 2026, to include the Ministries of Justice, Culture, and Education and Science and their subordinate institutions. Centralization reduces costs in the long term, improves the quality of financial data, and promotes unified state budget management.
Overall, the government's work on reviewing expenditure confirms a systematic approach to public finance management. It is not just a mechanical reduction, but a tool that helps to assess the effectiveness of policies, identify unused resources, and redirect funds to where they provide the greatest public benefit. Thus, the informative report not only fulfills the task set by the Cabinet of Ministers, but also improves the state's ability to manage public finances in a responsible and sustainable manner.
The informative report is available on the Legal Acts Portal.