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Identification and management of
fiscal risks in Latvia
Krista Belija
Senior Expert
Budget Development Division
Budget Policy Development Department
Developments in budgetary governance
2
Medium-term budgetingFiscal rules
Spending reviews
Linkage of strategic
planning documents and
budgetary resources
Budget communication
Identification and
management of
fiscal risk
Fiscal policy strategy is based on a balanced budget during the economic cycle
General government structural budget deficit in the long term (MTO) shall not exceed 0.5%
To provide a contribution through the fiscal policy measures for potential growth to increase
from 3% to 5% of GDP by implementing tax reform measures
To maintain the general government structural budget balance at -0.5% of GDP in 2019,
and -0.4% of GDP in 2020
3
Fiscal policy plans
-1.2 -1.2
-1.4 -1.4
0.1
-0.6
-1.0
-0.5 -0.4
-4.3
-3.3
-2.9
-2.3
-1.7
-1.0
-0.6
-1.0 -1.0
-5.0
-4.5
-4.0
-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
2012 2013 2014 2015 2016 2017 2018 2019 2020
Latvia EU-28
General Government Budget Balance (% of GDP)
Source: Eurostat, AMECO, Latvia’s Stability Programme 2019-2022
The Law on Fiscal Discipline
4
Balance rule
Expenditure should
not grow faster than
average potential
GDP growth
Expenditure thresholds
of the first and second
year of the FL are
inherited from the second
and third year of
previous FL
Expenditure growth
rate rule
Expenditure thresholds
for the medium term
Structural balance
should not be less
than -0.5% of GDP
*FL – Framework Law
General management of fiscal risks
Declaration of Fiscal Risks
(annexed to the Medium-Term Budget Framework Law)
5*Cabinet Regulation No. 229 «Regulations Regarding the General Management of Fiscal Risks
and Methodology for Determining the Amount of Fiscal Security Reserve»
General management
of fiscal risks
Specific fiscal risks
Individual fiscal risks
Ministry of Finance
Central State institutions
State commercial companies
Implementers of:
• the projects and measures
• public-private partnership projects
6
Fiscal Discipline Council
An independent
collegial body
Monitors the compliance with the
rules of the fiscal discipline
Fiscal risks working group
reviews the government statement of
the fiscal risks accompanying the draft
annual budget and the budget
framework laws
Assesses if the Fiscal Safety
Reserve allocation has been
sufficient to counter the probability of
fiscal risks happening during the
fiscal year
Fiscal Discipline Council
Thank you!
Smilšu street 1, Rīga, LV-1919, Latvia
Phone: +371 67 095 405
Fax: +371 67 095 503
E-mail: info@fm.gov.lv
Homepage: www.fm.gov.lv

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Fiscal Risk Management - Krista BELIJA, Latvia

  • 1. Identification and management of fiscal risks in Latvia Krista Belija Senior Expert Budget Development Division Budget Policy Development Department
  • 2. Developments in budgetary governance 2 Medium-term budgetingFiscal rules Spending reviews Linkage of strategic planning documents and budgetary resources Budget communication Identification and management of fiscal risk
  • 3. Fiscal policy strategy is based on a balanced budget during the economic cycle General government structural budget deficit in the long term (MTO) shall not exceed 0.5% To provide a contribution through the fiscal policy measures for potential growth to increase from 3% to 5% of GDP by implementing tax reform measures To maintain the general government structural budget balance at -0.5% of GDP in 2019, and -0.4% of GDP in 2020 3 Fiscal policy plans -1.2 -1.2 -1.4 -1.4 0.1 -0.6 -1.0 -0.5 -0.4 -4.3 -3.3 -2.9 -2.3 -1.7 -1.0 -0.6 -1.0 -1.0 -5.0 -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 2012 2013 2014 2015 2016 2017 2018 2019 2020 Latvia EU-28 General Government Budget Balance (% of GDP) Source: Eurostat, AMECO, Latvia’s Stability Programme 2019-2022
  • 4. The Law on Fiscal Discipline 4 Balance rule Expenditure should not grow faster than average potential GDP growth Expenditure thresholds of the first and second year of the FL are inherited from the second and third year of previous FL Expenditure growth rate rule Expenditure thresholds for the medium term Structural balance should not be less than -0.5% of GDP *FL – Framework Law
  • 5. General management of fiscal risks Declaration of Fiscal Risks (annexed to the Medium-Term Budget Framework Law) 5*Cabinet Regulation No. 229 «Regulations Regarding the General Management of Fiscal Risks and Methodology for Determining the Amount of Fiscal Security Reserve» General management of fiscal risks Specific fiscal risks Individual fiscal risks Ministry of Finance Central State institutions State commercial companies Implementers of: • the projects and measures • public-private partnership projects
  • 6. 6 Fiscal Discipline Council An independent collegial body Monitors the compliance with the rules of the fiscal discipline Fiscal risks working group reviews the government statement of the fiscal risks accompanying the draft annual budget and the budget framework laws Assesses if the Fiscal Safety Reserve allocation has been sufficient to counter the probability of fiscal risks happening during the fiscal year Fiscal Discipline Council
  • 7. Thank you! Smilšu street 1, Rīga, LV-1919, Latvia Phone: +371 67 095 405 Fax: +371 67 095 503 E-mail: info@fm.gov.lv Homepage: www.fm.gov.lv