Notification on General Government Budget Deficit and Debt in April 2009

17.04.2009

According to results of the April 2009, general government budget deficit and debt notification[1], which, using provisional data of the Ministry of Finance, the Treasury, the Ministry of Economy and Central Statistical Bureau (CSB), were recalculated in conformity with methodology of European System of Accounts, the general government budget deficit in 2008 reached 645.4 mln lats or 4.0% of Gross Domestic Product (GDP), of which central government budget deficit, respectively, 652.2 mln lats or 4.0%, budget deficit of local governments – 246.5 mln lats or 1.5%. In social security fund budget surplus comprised 253.3 mln lats or 1.6% of GDP.

Compared to provisional data of the Treasury, which in 2008 witnessed that general government budget deficit was 531.1 mln lats or 3.3% of GDP, budget deficit in notification was more by 114.3 mln lats or 0.7% of GDP. Main adjustment which impacted this difference is:

  • taxes adjustment using time displacement method (information source – calculation of the Ministry of Finance), negative adjustment – minus 1.3% of GDP;

  • adjustment for requirements to debtors (data of the Treasury), positive adjustment – plus 0.8% of GDP;

  • adjustment for liabilities to creditors (data of the Treasury), positive adjustment – plus 0.7% of GDP;

  • balance of merchants controlled and financed by state and local governments switched over to general government (data of the CSB), negative adjustment – minus 0.3% of GDP;

  • expenditure on construction of the Southern Bridge (data of Riga town council), negative adjustment – minus 0.3% of GDP.

In 2008 general government debt reached 3164.7 mln lats or 19.5% of GDP, of which central government debt, respectively, 3875.1 mln lats (before consolidation among subsectors), local governments’ debt - 644.8 mln lats, social security fund debt – 0.7 mln lats.

In February this year to make sure about conformity of methods and data sources used in drafting of notification on general government budget deficit and debt to requirements and notification preparation guidelines of European System of Accounts ESA'95 experts from the Statistical Office of the European Commission Eurostat, the European Commission and the European Central Bank visited Latvia. During the visit several areas were indicated where improvements could be done, however significant violations of methodology requirements were not found.

On the April 22 the EU Statistical Office Eurostat will release information on the results of the April 2009 notification in all EU member states.

Adjusted and annual data on general government budget deficit and debt on 2008 the CSB will publish in October 16 2009.

[1] In compliance with the requirements of Regulation EC No. 3605/93, the government deficit and debt notification is submitted to the European Commission twice a year, by April 1 and October 1. The results of the notification are used for assessing how the EU member states observe the compliance of the respective economic indicators with the criteria established by the Maastricht Treaty, that is, the ratio of the planned and actual government budget deficit to the gross domestic product (GDP) at current prices must not exceed 3.0% and the ratio of the government debt to the gross domestic product at current prices must not be higher than 60.0%.

Prepared by the Government Finances Section

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