On Monday, 30 June, Minister for Finance Arvils Ašeradens informed Prime Minister Evika Siliņa that the line ministries have fulfilled the government's task by submitting a total of 250 proposals to cut spending in order to boost public sector efficiency, strengthen the country's fiscal sustainability and reduce administrative costs at the same time.
The line ministries have made proposals to cut remuneration, subsidies, goods and services and other expenditure. The Ministry of Finance (MoF) will continue to carefully analyse and assess the proposals submitted with a view to preparing them for submission to the Government. The MoF has also carried out a financial appraisal analysis, identifying opportunities to reduce expenditure by EUR 150 million in 2026, which would lead to cumulative savings of up to EUR 450 million over three years until 2028.
"I appreciate the cooperation of line ministers and ministries in the spending review process and their willingness to tackle budgetary challenges. The proposals developed to streamline operations and reduce expenditure will be carefully assessed by the Government with a view to finding constructive solutions to put them into practice. Public participation has also been essential, with government partners and social partners providing a multifaceted perspective and support for the common goal. This work forms the basis for the preparation of a challenging budgetary framework for 2026 and 2026-2028," said Minister for Finance Arvils Ašeradens.
According to the #Budget2026 timetable, the information report on spending cuts and revisions will be submitted to the Cabinet of Ministers by August 19’th. At the same time, the MoF will update the state budget revenue forecasts and recalculate the fiscal space on the basis of updated macroeconomic indicator forecasts, so that the government can fully continue its work on the budget.
These proposals are part of a broader plan to substantially review public sector resources and optimise costs in order to focus resources on the country's strategic priorities of strengthening defence and tackling demographic issues. At the same time, the MoF, in cooperation with line ministries, is continuing its annual review of budget expenditure to systematically analyse the justification, impact and effectiveness of spending.
In parallel, work is underway on structural reforms and the medium-term budgetary strategy, including the necessary regulatory framework and legislative amendments to ensure that the proposals are implemented in practice. Independent institutions will also be invited to assess, in solidarity with public administrations, how they can use resources more efficiently and reduce expenditure in their operations.
In view of the recent municipal elections and the confirmation of the new Councils, work will also be undertaken with municipalities to streamline and reduce their expenditure. Work will also be carried out with shareholders and stakeholders to optimise the costs of state and municipal corporations. As a result, all levels of government - state, local and capital - will be affected by public spending cuts.
The government's social and cooperation partners - the Bank of Latvia, the State Audit Office, the Latvian Confederation of Free Trade Unions, the Employers' Confederation of Latvia, the Latvian Union of Local Governments, non-governmental organisations and experts in various sectors - have been actively involved in the process of reviewing public budget expenditure. Their participation provided a multifaceted perspective and an in-depth assessment of the opportunities to optimise budget expenditure. Partners are invited to submit additional proposals where necessary.
The MoF is grateful to all stakeholders - social and cooperation partners as well as line ministries - for their constructive cooperation and efforts to jointly contribute to the efficiency and cost reduction of public administration. The Task Force aims not only to optimise public spending, but also to ensure fiscal sustainability and the country's ability to respond swiftly to security challenges.
This work is particularly important as the IMF's Spring 2025 mission highlighted the need for Latvia to review spending priorities, with a particular focus on strengthening defence and ensuring fiscal sustainability. The European Commission has granted fiscal flexibility to Latvia, allowing for a temporary deviation from deficit targets to cover rising defence spending. This demonstrates that the EC considers investment in security to be the foundation of societal and economic resilience.
It should be noted that the MoF has updated its forecasts of macroeconomic indicators for 2025-2029 at the start of the preparation of the 2026 State Budget. Latvia's economic growth is forecast at 1.1% this year, down 0.1 percentage point from the previous forecast, given the increased uncertainty in external markets following the US tariff announcements and the weaker performance of the Latvian economy at the start of the year. At the same time, the projections for the coming years remain unchanged at 2.1% growth in 2026 and 2.2% growth in the following three years.
