June 17, 2009 / 5:32 PM / 10 years ago

FACTBOX-Latvia austerity steps and budget cuts

June 17 (Reuters) - The Baltic state of Latvia is having to make drastic cuts in its state budget in order to win more funds from the European Union and International Monetary Fund to avoid bankruptcy and possible devaluation.

Before Latvia slid into crisis, it approved a 2009 budget with spending of 5.6 billion lats ($11.11 billion) on income of 5.3 billion lats.

The crisis budget just passed by parliament had spending of 4.7 billion lats ($9.32 billion) and income of 4.0 billion.

The following are the main elements of the latest austerity measures, where parliament on June 16 approved further cuts of 500 million Latvian lats in the 2009 finance bill.

SPENDING CUTS

— A general 20 percent cut in public sector salaries. This is in addition to a 15 percent reduction approved earlier in the year. However, teachers say the reduction for them is between 40 and 50 percent.

— A general 40 percent reduction in other spending.

— A reduction in old age pensions of 10 percent

— A reduction of 70 percent in the pensions of pensioners who also work

— Promised reduction of 30 percent state bureaucracy

— Cuts in the budgets of various ministries, including 45 million lats at the Health Ministry, 46 million lats at the Finance Ministry and 10 million lats at the Education Ministry.

— Salaries for members of parliament and ministers also cut

— Closure of advisory boards of state-owned companies

REVENUE MEASURES

— Rise in gambling taxes and excise duties

— Tax free minimum reduced from 90 lats to 35 lats

— Rises in payments to the state of dividends from state-owned companies (Reporting by Patrick Lannin)

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