Improving the functioning of public financial management in Latvia – Budget preparation and implementation

The project aimed to improve the budgeting framework in Latvia, by evaluating it against international benchmarks and strengthening it in line with identified good practices, including legal, institutional and reporting aspects of the budget process.

Context

The background for our project stemmed from the post-2013 reforms that aimed to stabilize Latvia's budget system and align it with EU fiscal standards. Despite those efforts, challenges persisted in efficient planning and budget implementation. The predominant use of a rolling budget process led to the re-proposal of ongoing expenditures and prioritized new policy initiatives over genuine needs. Additionally, expenditure forecasts often failed to anticipate actual budgetary requirements over the long term. Ministerial ceilings were lacking at the outset of budget preparation, making it difficult to achieve necessary savings. Our project sought to address these challenges and improve fiscal management in Latvia.Top of Form

Support delivered

Describe the support delivered. What are the main activities carried out and how were they carried out? Please reply to the “Five ‘W’s” are “Who,” “What,” “When,” “Where,” and “Why.” Please also mention the EU funding information and any partner organisations involved.

The OECD has developed recommendations on institutional design and operational arrangements for an improved and effective multi-annual expenditure framework that is aligned with strategic planning and supports expenditure control, including commitment controls, cash planning and management, and reporting. The recommendations are mainly addressed to the Ministry of Finance but they also recognise the importance of the line ministries’ role in budget formulation and expenditure control processes, as well as the necessity for building competencies within line ministries so that not only are roles and responsibilities understood clearly, but that officials have the skills to carry out these roles and responsibilities. The recommendations facilitate the provision of improved functional information that fulfils the requirements of the Ministry of Finance as well as the line ministries.

Results achieved

Describe the results achieved by the project. What is the benefit to the beneficiary and its main stakeholders? What is the expected improvement and impact on the ground? Feel free to mention relevant statistics and sources.

Thanks to the project implementation the following results have been achieved: an update of legal and regulatory framework of the public financial management framework (Law on Budget and Financial Management to be updated after the project recommendations), recommendations for the functional requirements so that the authorities update the budget planning and execution information system (SBPEIS), recommendations to revise the institutional design and operational arrangements for the expenditure control framework so that line ministries are more involved in an accurate way in the budget process.