850 million euros is the minimum amount that must be saved in the public sector expenditures when preparing the next year’s budget, the development of which will commence in March. To achieve this result, four business organizations — Foreign Investors’ Council in Latvia (FICIL), Employers’ Confederation of Latvia (LDDK), Finance Latvia Association (FNA) and Latvian Chamber of Commerce and Industry (LTRK) — have signed a declaration today, January 23, committing to cooperate and provide their insights on necessary actions to the Prime Minister Evika Siliņa.
“In 2024, the Latvian government committed to becoming the most efficient public administration in Europe by reducing administrative burdens and state expenditures, thereby redirecting additional resources to human capital, energy, and other critical areas. Foreign investors are expecting concrete steps toward realizing this ambition, demonstrating that Latvia’s public administration is reliable, focused on efficiency and on fostering sustainable economic growth. Drawing on best practices from other European countries, reducing state expenditures requires a review of the core positions of the national budget, establishing clear and measurable goals to implement performance-based budgeting, promote digitalization, and significantly improve the efficiency of public sector employees,” emphasizes Jānis Grants, the Board Member of the Foreign Investors’ Council in Latvia (FICIL).
“It’s time to stop playing blind man’s bluff. We must finally acknowledge that the public sector in Latvia is living beyond its means. By reducing next year’s budget expenditures by just 5%, there would be sufficient resources to increase defense spending and address other urgent issues. Any planning for additional expenditures must not come at the expense of citizens. Every entrepreneur knows how to reduce costs by 5%. The initiative to cut spending must be led by the Prime Minister, and we, the four largest business organizations, are ready to support this process,” explains Kaspars Gorkšs, the Director General of the Employers’ Confederation of Latvia (LDDK).
“The Finance Latvia Association, together with other social partners, seeks to highlight the necessity of a targeted reduction in public sector expenditures by at least 5% of the state’s consolidated budget, amounting to approximately 850 million euros annually. It is important to emphasize that improving the efficiency of the public sector expenditures will make a significant contribution to the country’s development, enhancing Latvia’s competitiveness, promoting more efficient resource use, and creating a more favorable environment for business. We urge the government to act without delay by developing and implementing a concrete action plan to avoid raising taxes or increasing the national debt in the near future. This issue must become a top priority for the government,” says Uldis Cērps, Chairman of the Board of the Finance Latvia Association.
“In today’s geopolitical circumstances, any savings from irrational expenditures are crucial to funding the increasing defense budget. However, I want to emphasize the need to reduce the budget spending, particularly in areas where it simultaneously reduces bureaucratic burdens. This would have a significant impact on Latvia’s rapid prosperity growth, as cost savings would enable existing businesses to grow faster, improve the investment climate, eliminate some root causes of corruption and the shadow economy, and free up additional workforce for the private sector. Reducing bureaucracy has been a part of countless government plans, including those of the current administration. The question is—will this government succeed in turning words into action?” says Jānis Endziņš, Chairman of the Board of the Latvian Chamber of Commerce and Industry (LTRK).
Latvia has significant potential to reduce the public sector expenditures, while increasing its efficiency, thereby enhancing the country’s competitiveness and improving the business environment. This will promote better workforce availability in the private sector, enabling more rational use of human resources, especially given that nearly one-third of Latvia’s workforce is currently employed in the public sector. It is also crucial that the plan for reducing public sector expenditures includes municipalities and employees of municipal institutions.
A reduction in public sector expenditures of this magnitude is only achievable through a dedicated, centralized process management in accordance with the principles of good governance. A project of this scale requires a clear political mandate, along with adequate financial and human resources. If such a project is not implemented this year, the Latvian government will likely have to raise taxes in the coming years, negatively impacting the country’s competitiveness and business environment. Alternatively, if increasing expenditures are covered by expanding national debt, this could deteriorate the country’s creditworthiness and raise the cost of servicing the national debt.
By signing the declaration, business organizations commit to providing their vision to support the government in public and in a constructive manner, helping to develop a plan on the reduction of the public sector expenditures. This must become not only a priority for this year, but in particular for the first quarter of the year to achieve measurable results. Therefore, not only the public communication, but also targeted action must begin immediately, and the initiative must come from the Prime Minister.
On behalf of their respective organizations, the declaration on cooperation to reduce government expenditures was signed by: Kaspars Gorkšs, Director General of the Employers’ Confederation of Latvia (LDDK); Uldis Cērps, Chairman of the Board of the Finance Latvia Association (FNA); Jānis Endziņš, Chairman of the Board of the Latvian Chamber of Commerce and Industry (LTRK); and Jānis Grants, Board Member of the Foreign Investors’ Council in Latvia (FICIL).