Financial Services, Latvia, Medicine

The medium-term budget framework for 2018, 2019 and 2020 adopted by the parliament last November provides for a fiscal reserve at 0.1% of the gross domestic product (GDP) in 2018. There is no plan for a fiscal reserve in 2019, but in 2020 the fiscal reserve should be 0.1% of GDP again.

However, Reizniece-Ozola now said that the Finance Ministry will call to plan a fiscal reserve also in next year’s budget. The size of the fiscal reserve will be clear by fall when the macroeconomic forecasts are ready.

The Fiscal Discipline Council also in April this year said that the government should ensure a fiscal reserve in 2019.

Reizniece-Ozola said that the economy is developing, tax collection is very good, therefore in such times there is seemingly a wish to increase wages in the public sector.

"The demand of the Education and Science Ministry to raise teachers’ wages is not the only one. Additional financing is also required for wages of judges, medics. I am very cautious, however, because at present the average wage in public sector is higher than the average wage in private sector. It is not healthy. We should be careful with raising wages in the public sector too steeply. We should sooner think about a fiscal reserve rather than about quick distribution of all resources," the minister said.

As reported, despite the earlier predicted negative fiscal space, ministries are demanding additional EUR 1.1 bln for their priority measures in the 2019 budget, according to the information at the disposal of the Finance Ministry. The Health Ministry has required additional EUR 431.39 mln, the Transport Ministry need EUR 136.2 mln, the Education and Science Ministry needs EUR 106.3 mln, the Interior Ministry needs additional EUR 103.15 mln, the Welfare Ministry needs EUR 69.27 mln, and the Economics Ministry needs EUR 40.29 mln.