1. General information

1.1. Legal and methodological basis of the general government budget deficit and debt notification preparation

General government deficit and debt notification preparation methodology and deadlines are regulated by the following legal acts and methodological materials:

  1. European Parliament and Council regulation (EC) No 223/2009 of 11 March 2009 on European Statistics and which cancels European Parliament and Council regulation (EC, Euratom) No 1101/2008 on transmission of such statistical information to the Statistical Office of the European Communities to which confidentiality concerns, Council regulation (EC) No 322/97 on Community Statistics and decision of Council 89/382/EEC, Euratom which establishesCommittee on the Statistical Programmes of the European Communities;
  2. European Parliament and Council regulation (EU) No 549/2013 of 21 May 2013 on the European system of national and regional accounts in the European Union;
  3. Council regulation (EC) No 479/2009 of 25 May 2009 on the application of the Protocol on the excessive deficit procedure annexed to the Treaty establishing the European Community;
  4. Council regulation (ES) No 679/2010 of 26 July 2010 amending Regulation (EC) No 479/2009 as regards the quality of statistical data in the context of the excessive deficit procedure;
  5. Commission regulation (EU) No 220/2014 of 7 March 2014 amending Council regulation (EC) No 479/2009 as regards the European system of national and regional accounts in the European Union;
  6. Manual on government deficit and debt (Implementation of ESA 2010) issued by Statistical Office of the European Union Eurostat;
  7. Regulations No.748 “Order in which general government budget deficit and debt notification has to be prepared” of October 4, 2011 by the Cabinet of Ministers of the Republic of Latvia.

1.2. Order of general government sector composition determination

According to ESA 2010, general government sector (S.13) in Latvia consists of three subsectors:

  1. central government sub-sector (S.1311);
  2. local government sub-sector (S.1313);
  3. social security fund sub-sector (S.1314);

On 31 December 2014 general government consisted of 1128 independent budgetary institutions, of which central government (255 institutions), local government (872 institutions) and social security fund (1 institution).

129 units have been reclassified from the non-financial corporations sector to the General Government sector (50 units to the central government and 79 units to the local government).

The list of enterprises related to general government sector is prepared by the Central Statistical Bureau (CSB) by verifying enterprise compliance with the following criteria:

  • whether it has institutional unit features;
  • whether it belongs to the government sector (participation of central and local governments  in the enterprise’s equity capital exceeds 50%);
  • whether it is considered an institutional unit of the non-market public sector.

If the main function of a unit is participation in national income and treasure division and it has Classification of Economic Activities NACE Rev.2 code starting with „84”, the unit is related to the general government sector.

If main function of the unit is financial intermediation and it has Statistical classification of economic activities NACE Rev. 2 code starting with “64”, “65” or “66”, the unit is classified outside the general government sector unless special methodological conditions foreseen in Guidelines for the government deficit and debt are not related to it.

Belonging of other selected units to the general government sector is determined by analysing data on financial activity provided in the annual report. Data from reports of the previous five years is used for the analysis. If the condition is met (for the last three years) that the unit’s net turnover minus received general or local governments budget assignation is less than 50% of the unit activity costs, the unit is related to the general government sector.

In cases when more than a half of net turnover of the unit is comprised by remuneration of units of other general government sectors for services provided (division of central or local governments’ budget allocation takes place), results obtained in the analysis are not taken into account and such unit is related to general government sector.

1.3. Relation between national methodology of general government budget calculation and European System of Accounts ESA 2010

In order to ensure transition from government budget deficit or surplus to net borrowing, net lending (B.9) according to ESA 2010, additional adjustments are made which are based on applying accrual principle in listing. Revenues and expenditure in the budget are listed according to cash flow principle, i.e., at the moment the money goes into the account, however, national account methodology requires recording flows at the moment they form.

Moreover, data on budget are adjusted on financial transactions, debts and liabilities, revenues from selling real estate, as well as supplemented with data on the results of activity of merchants controlled and financed by the central and local governments.

General government debt is gross debt at nominal value outstanding at the end of year of the whole general government sector. General government debt is comprised by general government sector liabilities in the following categories: Currency and deposits (AF.2); debt securities, (AF.3) and loans (AF.4) which are calculated according to ESA 2010 requirements.

1.4. Submission of notification on general government budget deficit and debt

Notification of government budget deficit and debts is regularly sent to EU institutions in accordance with the single form liable to all EU member countries in set terms (twice a year – before April 1 (provisional data) and before October 1 – (final data)).

The institution responsible for preparation of the notification is the CSB. Specialists from the Ministry of Finance and the Treasury, as well as from the Bank of Latvia are involved in the process of preparation of the notification. If necessary, additionally specialists from other institutions (the Ministry of Economy, the Ministry of Defence, the Ministry of Welfare, Riga City Council, etc.) are involved.