Latvia's Ministry of Finance published a review of Finance Minister Arvils Ašeradens's term, presenting stronger national security, a return to economic growth, investment mobilisation and sustainable public finances as its main policy results. It said the budget had been redirected toward defense and growth, with Latvia's economy returning to growth in 2025 as gross domestic product increased 2.1% after two years of stagnation. Defense funding increased from EUR 813 million, or 2.3% of GDP, in 2022 to EUR 2.16 billion, or 4.7% of GDP, in 2026, keeping Latvia on a medium-term path toward 5% of GDP. The review also highlights labour tax changes, including a uniform fixed tax-free allowance raised to EUR 550 in 2026 and a higher minimum wage from EUR 500 in 2022 to EUR 780 in 2026, together with nearly EUR 1.4 billion of European Union and Recovery Fund investment in 2025, a EUR 371.2 million fourth Recovery Fund payment, and EUR 540 million channelled through ALTUM financial instruments. Public sector measures cited include continued State Revenue Service reform, transfer of the Tax and Customs Police to the interior minister's remit, treasury-led accounting centralisation, medium-term budget expenditure cuts of EUR 844.1 million, and procurement reforms aimed at strengthening competition and reducing delays. The ministry also cites MONEYVAL's assessment as evidence of progress in anti-money laundering controls and says financing conditions improved through European Central Bank rate cuts and Latvia's bank solidarity contribution mechanism, with household lending up 9.9% and corporate lending up 14.6% in 2025 and deposits above EUR 12.7 billion in March 2026. Further work identified in the review includes building almost 1,500 affordable rental homes for key specialists across seven municipalities by 2030, advancing proposals for capital market development and initial public offerings by state and municipal companies, introducing a new municipal financial equalisation model, and continuing the shift to results-based budgeting.
Ministry of Finance (Latvia)2026-05-28
Latvia's Ministry of Finance reviews rise in defense spending to EUR 2.16 billion and wider growth and fiscal reforms
The Latvian Ministry of Finance published a review of Finance Minister Arvils Ašeradens’s term, highlighting a budget shift toward defence and growth, a projected return to economic growth in 2025 with GDP up 2.1%, and strengthened public finances. The review notes higher defence spending, labour tax and minimum wage changes, greater use of EU and Recovery Fund financing, and public sector reforms including State Revenue Service restructuring, expenditure cuts and procurement changes. It also cites improved anti-money laundering controls, stronger lending conditions, and outlines further work on affordable housing, capital market development and municipal financial equalisation.