Fiscal council: fiscal consolidation next year is inevitable  14 December 2018

Fiscal council: fiscal consolidation next year is inevitable

On 13 December 2018, the Saeima adopted amendments[1] to the Law on Health care financing, thus supporting the proposal for funding health care sector remuneration raise for 20% as of 1 January 2019 with a fiscal impact of 87 483 708 euro in 2019, 191 227 820 euro in 2020 and 314 599 953 euro in 2021.

The Council notes that this measure does not indicate the sources of financing and there is also not sufficient free fiscal space available. We also find that the regulation of fiscal discipline is not sufficient in the context of the introduction of a temporary budget, endangering the implementation of a balanced macroeconomic policy and the country's ability to fulfil its commitments in the European Union.

In this situation, the Council expresses its concern that the decision to grant additional funding without compensatory measures also sends a clear signal that significant fiscal consolidation will be required in the coming months, when the new Government will prepare the new budget for 2019 and the budget framework for 2019-2021.

Opinion available here:

[1] Available in Latvian at Saeima website here:$FILE/152_Veselibas_aprupes_finans.docx, accessed on 13.12.2018