16.04.2010.

Methodology differences must be taken into account when drawing up budget

According to the provisional data of the Central Statistics Agency, the deficit of the Latvian state consolidated combined budget in 2009 was 1188.7 mil. lats (9.0% of GDP) following the ESA'95 methodology according to which compliance with the Maastricht criteria is evaluated. It follows that in 2009 Latvia has kept its agreement with the creditors regarding the maximum budget deficit and has not exceeded it. According to the national methodology, the deficit reached 892.1 mil. lats (6.7% of GDP). The difference, in the amount of 296.6 mil. lats, was the result of several adjustments, shifting from the national methodology to ESA'95 methodology, among them both deficit increasing and deficit decreasing adjustments. The most important deficit increasing adjustments were the following: 1) expenditure for the construction of the Southern Bridge (72.9 mil. lats), which, according to the national methodology, is not reflected in the state consolidated combined budget expenditure, 2) income from the sale of emissions quotas (91.4 mil. lats), which, according to the ESA'95 methodology is not considered as received (and is excluded from income), because in 2009 it was not used for the expected purpose, 3) the part of old age pensions withheld in 2009 (63.4 mil. lats), which has been paid this year, but refers to 2009, is registered under the 2009 expenditure, as well as 4) the adjustment of interest paid and accumulated in the reporting period (64.9 mil. lats) etc.

According to ESA'95 methodology, the debt of the Latvian government reached 4783.4 mil. lats (36.1% of GDP). In 2009, the debt increased by 1602.0 mil. lats primarily as a result of the payments received from the European Commission, International Monetary Fund, and World bank within the framework of the international loan aimed at helping Latvia stabilize its economy and resume growth.

The Latvian government has assumed the task of limiting the deficit of the state consolidated combined budget to 8.5% of GDP in 2010, 6.0% of GDP in 2011, and 3.0% of GDP in 2012, calculating it according to the ESA'95 methodology. The state budget in Latvia is drawn up according to the national methodology, which differs from the budget accounting principles used by European Union institutions as defined in ESA'95. The data for 2009 is yet another instance where the difference in the deficit levels as calculated by the two methodologies tends to be rather substantial. Moreover, in the last three years, the adjustment, shifting from the national methodology to ESA'95, has been deficit-increasing. Therefore this fact should definitely be taken into account when drawing up the budget for 2011 and subsequent years, according to the national methodology planning it with a sufficient reserve so as not to exceed the budget deficit goals.

APA: Tkačevs, O. (2020, 01. oct.). Methodology differences must be taken into account when drawing up budget. Taken from https://www.macroeconomics.lv/node/2461
MLA: Tkačevs, Oļegs. "Methodology differences must be taken into account when drawing up budget" www.macroeconomics.lv. Tīmeklis. 01.10.2020. <https://www.macroeconomics.lv/node/2461>.

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