RIGA, Oct 8 (LETA) - The 2025 state budget is a joint work, and the budget has been drafted in close dialog with local governments, both by working on such important issues as security, education, support for families, road infrastructure and passenger transport, and by looking for ways to cut budget spending, Prime Minister Evika Silina (New Unity) said on Wednesday.

Today, Silina and President of the Latvian Association of Local and Regional Governments (LALRG) Gints Kaminskis signed a protocol of agreement between the Cabinet of Ministers and the LALRG on the 2026 budget and the budget framework for 2026-2028.

After signing the protocol, Silina emphasized that one of the challenges to be tackled together was also economic development in the regions and improving competitiveness of local businesses.

According to the Finance Ministry, the government and LALRG have reached a number of agreements in the protocol, aimed at development, financial stability and sustainability of local governments. The government supported the signing of the protocol at its meeting on Tuesday.

The government has already decided that in 2026, EUR 3 million will be allocated to five municipalities at the European Union's external border to bolster their security: almost EUR 1 million to Ludza Region, more than EUR 780,000 to Kraslava Region, more than EUR 580,000 euros to Balvi Region, EUR 383,000 to Aluksne Region, and EUR 265,000 to Augsdaugava Region.

A steady increase in tax revenues is forecast for local governments in the coming years - in 2026, together with compensations, an increase of EUR 151.4 million, or 6.1 percent, is expected, said the Finance Ministry.

The government also guarantees that the personal income tax revenue forecast, which is the main source of revenue for local governments, will be fully met. According to the current forecasts, and provided that the government's policies remain unchanged, personal income tax revenue will grow 6.7 percent in 2026 and 5 percent on average in the following years.

The Finance Ministry also notes that the tax changes will have a positive impact on the majority of employees, as the monthly non-taxable minimum will rise to EUR 550 in 2026 and the minimum wage to EUR 780.

As reported, the budget bill and related package of draft legislation is due to be delivered to the Saeima on October 15.

The first reading of the budget bill in the Saeima is scheduled for November 5. The second and final reading could begin on December 3 and conclude on December 5.