On Tuesday, March 24, the Cabinet of Ministers endorsed a fiscally neutral draft law prepared by the Ministry of Finance (MoF) to reduce the excise tax on diesel fuel in order to mitigate the impact of rapidly rising fuel prices on the economy and the public. This measure will reduce the price of fuel by approximately 8.6 cents per liter (including value-added tax). Following the reduction, Latvia will have the lowest fuel prices in the Baltic States.
At the same time, the Baltic States - Lithuania, Estonia, and Latvia - are coordinating their actions to mitigate market shocks and the impact of fuel prices on residents. Estonia had initially planned to raise the excise tax on fuel starting May 1 but is now planning to abandon this step, while Lithuania is moving toward solutions similar to those adopted in Latvia.
The draft law provides for a temporary solution to the emergency situation caused by global disruptions in oil supplies. Since the end of February, both oil and fuel prices have risen significantly - in Latvia, the retail price of diesel fuel has increased by approximately 30%, reaching around 2.00 euros per liter.
According to the Ministry of Finance’s proposal, the excise tax rate on diesel fuel is planned to be reduced from 467 to 396 euros per 1,000 liters, or by approximately 15%. Currently, the lowest excise tax rate on diesel fuel in the Baltics is in Estonia - 428 euros per 1,000 liters - while in Lithuania it reaches 553.6 euros.
Similarly, in accordance with the decision made by the governing coalition parties at their meeting on March 23, 2026, the excise tax rate for marked diesel fuel used in agriculture will be set at 21 euros per 1,000 liters. This will reduce the price of marked diesel fuel by approximately 5.9 cents per liter (including value-added tax).
In both cases - for both diesel fuel and marked diesel fuel used in agriculture - the reduced excise tax rate will be in effect from April 1, 2026, until June 30.
The Ministry of Finance notes that rising fuel prices place a significant burden on both businesses and households, as well as impacting public sector operations, including emergency medical services, security, and defense services. Estimates show that without intervention, the additional costs to the Latvian economy could reach approximately 50 million euros per month.
At the same time, it is projected that the fiscal impact of the excise tax reduction on the state budget could be close to neutral, as rising fuel prices increase value-added tax revenues.
The draft law has yet to be reviewed by the Saeima.