Notification on General Government Budget Deficit and Debt in April 2011

18.04.2011

According to the results of the April 2011 general government budget deficit and debt notification1, which were developed in compliance with the methodology of European System of Accounts ESA’95, the general government deficit in 2010 reached LVL 983.9 million or 7.7% of Gross Domestic Product (GDP) and the general government debt comprised  LVL 5693.6 million or 44.7% of GDP.

April 2011 government budget deficit and debt notification: main indicators

 

2007

2008

2009

2010

Budget deficit (-)/surplus (+), mln LVL

General government

-51.7

-682.5

-1264.4

-983.9

Central government

-365.3

-732.4

-702.9

-636.2

Local governments

-101.0

-203.5

-244.2

-32.5

Social security fund

414.6

253.4

-317.3

-315.2

General government consolidated gross debt at nominal value at the end of the year, mln LVL

1329.8

3181.4

4801.9

5693.6

Gross domestic product at current prices, mln LVL

14779.8

16188.2

13082.8

12735.9

As % over GDP

General government deficit (-)

-0.3

-4.2

-9.7

-7.7

General government consolidated gross debt at nominal value at the end of the year

9.0

19.7

36.7

44.7

In comparison with the Treasury provisional data, which in 2010 indicated general government budget deficit of LVL 802.7 million or 6.3% of GDP, the budget deficit, calculated according to the methodological requirements of the European System of Accounts ESA’952, is LVL 181.2 million or 1.4% of GDP higher.

Major adjustments, which have influenced this difference, with negative impact (deficit increase as percent of GDP) are:

  • government investments in financial institutions (Parex banka and Latvijas Hipotēku un zemes banka) – by 2.3%
  • inclusion of Southern bridge construction costs into expenditure of local government sub-sector –  by 0.3%;
  • adjustment of accrued and paid interest difference – by 0.3%;
  • adjustment regarding creditors – by 0.2%;

At the same time, adjustments with positive impact have been carried out (deficit decrease in % of GDP):

  • adjustment of European Union funds acquisition – by 1.0%.
  • tax adjustment using time-adjusted cash method – by 0.3%;
  • adjustment regarding claims towards debtors – by 0.3%.
  • impact of enterprise balance results controlled and financed by central and local governments was re-classified to general government sector – by 0.2%;

Moreover, previously published data on years 2007-2009 have been revised, as well.Following adjustments have been made:

  • adjustment of state support payments for biofuel produced in previous years;
  • following the latest guidelines of the Statistical Office of the European Commission Eurostat, income from state owned greenhouse effect gas emission trade were re-classified eliminating the negative effect of these activities;
  • resources received in the central government budget within the framework of the European Union fund acquisition and their use were adjusted in accordance with the time adjustment method.

General governmnent budget deficit or surplus by subsectors in 2007-2010, % of GDP

In comparison with a year before, general government debt value in 2010 has grown by LVL 891.7 million or by 18.6%, but debt of central government before consolidation among sub-sectors grew by LVL 564.1 million or by 10.8%, of local governments – by LVL 58.9 million or by 7.7%, respectively, but debt of social security fund, in turn, reduced by LVL 0.2 million or by 3.3%.

General government consolidated gross debt at nominal value at the end of the year

In the calculations of notification of April 2011 data from the Ministry of Finance, the Treasury, the Ministry of Economics, Central Statistical Bureau and Riga City Council are used.
On the April 26 the Statistical Office of the European Commission Eurostat will release information on the results of the April 2011 notification in all EU member states.


Prepared by the Government Finances Section
Vija Veidemane
Tel. 67366963


1 In compliance with the requirements of Regulation EC No.479/2009, 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%.

2 Necessity for adjustment arises from ESA’ 95 methodological requirements and guidelines for the preparation of financial statistics of government sector.They require that accrual (instead of cash flow) principle is followed in the calculations, and that financial transaction from government sector balance, as well as influence of European Union funds is neutralized.