Latvian municipality seeks financial stabilisation after years of budget problems

The municipal council of Valka in northern Latvia voted unanimously on 29 October to begin a financial stabilisation process, acknowledging that it could no longer resolve its financial difficulties without state assistance.

The municipality plans to request a €619,000 stabilisation loan to cover its obligations and avoid overdue payments at the end of the year. The procedure would involve state financial support and oversight by the Ministry of Finance.

A State Audit Office report published on 30 October found that Valka’s problems had accumulated over several years because of weak financial management, unrealistic revenue forecasts and insufficient expenditure controls. In 2024 alone, actual municipal revenue fell €2.03 million short of budget projections.

Auditors also found that municipal heating and water tariffs failed to cover the full cost of providing those services. The findings point to structural budget management problems rather than a temporary shortage of cash.

Sources: LSM — council decision; LSM — State Audit Office findings