Fiscal council points at risks of the balancing fiscal stance  28 November 2018

Today Fiscal discipline council held a regular meeting on issues related to the proposed amendments to the law on budget and financial management and looked at the prospects for fiscal development.

The Saeima Budget and finance (taxation) committee has begun to consider a proposal for amendments to the Law on Budget and Financial Management, mainly due to the interim budgetary regulation, until the new Saeima approves the new government. The proposal reviewed by the Saeima committee proposes to refuse the limitation in the interim budget within one month to the expenditure authorisation not to exceed 1/12 of the expenditures approved in the previous year's budget.

The Fiscal discipline council proposes to comply with the maximum budget expenditures for 2019 during the preparation of the interim budget, which are approved by the Medium term budget law for 2018, 2019 and 2020. Any increase in expenditures for pensions, contributions and remuneration, that have not been included in the medium-term budget framework law, must be fully compensated by the reduction of the other government budget expenditures.

The Council notes that the Government has incurred high expenditure commitments, which do not have sufficient resources in the national budget plans. It could lead to severe choices for the 2019 budget, as well as problems for political parties to implement their priorities in the process of the Government establishment. It is particularly problematic to consider a budget with a deficit in the conditions of the rapid economic development. There remains a very high risk that, under insufficient control of the level of budget expenditures, there may be a need to reduce the budget expenditures or increase the tax burden in order to compensate imbalances.