Latvia’s government ministries have begun outlining a series of proposed cost-cutting strategies aimed at easing pressure on the national budget. More than 250 suggestions have been submitted to the Ministry of Finance, potentially paving the way for savings totalling €150mn by 2026, LSM.lv reported on July 1.

At the end of 2024, Latvia’s parliament approved a €17.1bn state budget for 2025, prioritising defence, public sector wages and regional development while grappling with a growing deficit and rising public debt.

According to figures from the Ministry of Finance, total government revenue is projected to reach €15.1bn, leaving a deficit of approximately €2bn – or about 2.9% of the country’s GDP. Analysts warn the actual deficit may climb to 3.1% if further fiscal discipline is not enforced.

Finance Minister Arvils Aseradens described the process of cuts as complex but necessary.

Officials from the Finance Ministry are currently reviewing these submissions and have indicated that, if implemented, they could unlock long-term reductions amounting to €450mn over three years.

“There were disagreements, as expected, but eventually ministries acknowledged the reality and began to cooperate…However, discussions with autonomous state entities remain ahead – these bodies act independently, and only the Parliament Saeima has the authority to finalise their proposals. Introducing clear standards for state-run enterprises will also be a challenge,” the minister said, LSM.lv reported.

Prime Minister Evika Silina reassured the public that essential services and vulnerable groups would remain protected. “We are prioritising stability – welfare support, education for youth, and healthcare must not be compromised,” she noted, LSM.lv said.

As reported by bne IntelliNews, recently, Silina called on the coalition to decide on freezing the salaries of ministers and other senior state officials.

Economic Minister Viktors Valainis suggested the cuts should go deeper, a sentiment echoed by Progressives co-leader Andris Suvajevs, who criticised some ministries for dragging their feet. “Many are still handing out bonuses and avoiding tough decisions...I see few meaningful reforms – this was a missed opportunity to take bold steps under the cover of external pressures,” he said, LSM.lv reported.

Elsewhere, political figures are sounding alarms over broader fiscal risks. MP Andris Kulbergs, speaking on TV24’s Zinu TOP, claimed the government is running on borrowed time. According to him, Latvia may be staring down a deficit close to €600mn.

“In its current form, the administration is no longer operational. The numbers don’t add up, and we’re not seeing the political will to fix it,” said Kulbergs. “I fear we’ll soon be looking at tax hikes or forced asset sales,” he said, Zinu TOP reported.

The summary of the report was published on BNN.lv

He also pointed to large-scale, unresolved liabilities such as airBaltic, Rail Baltica, and the national railways – describing them as “financial weights we can’t ignore.”

Although Latvia technically retains borrowing capacity – up to €5.5bn until the end of 2028 – Kulbergs cautioned against overreliance on loans.

 “We may be pushing our economy to the brink. The debt has to be paid, and at some point, the burden may become unsustainable,” he warned, Zinu TOP and BNN.lv reported.

Defence and internal security are at the heart of the new spending plan. Defence spending alone will account for 3.5% of GDP, increasing to 3.65% by year’s end – a historic high, as the country seeks to bolster military readiness amid ongoing geopolitical tensions.