Spending review as essential part of public sector budgeting: Latvian experience

Abstract

One of the modern trends in public sector budget governance is evaluation of allocation of the resources, re-allocation of budget resources to achieve political goals and ensure sustainable financing for different public needs. This study is the first analysis of Latvian experience of public spending reviews in 2016 – 2019, characterises present patterns and proposes changes for future spending reviews. In general, the Ministry of Finance is conducting public spending review as quite technocratic exercises – an opportunity to make sure that existing public institutions’ budgets are being spent as efficiently as possible and conduct decision making on the civil service level. However, involvement of political level is a possibility to ensure that public spending objectives are met and the allocation of public resources reflects policy goals. The main task of the paper is to analyse the Latvian experience of regular public spending reviews and generalize recommendations for other countries and future development of the spending reviews. It can be concluded that increasing prioritization of budgetary spending and its relation with economic development can be supported by spending reviews as a mechanism to increase government spending in priority policy areas and to ensure reallocation of resources for underfinanced budget programmes through improvement of the efficiency of expenditures. Recommendations on improvement of the spending review process and possible changes to the budget law legislation are worked out.