Finance Ministry: Valka municipality's financial situation remains critical

Latvia's Finance Ministry (FM) has stated that Valka municipality's financial situation is critical and has not significantly improved this year. The municipality regularly delays payments, including tax obligations, and continues negotiating debt repayment schedules with creditors, but its submitted cash flow plan is not balanced in the long term.

Scale of debt

According to the municipality's own reports, as of August 31 the total of overdue payments and deferred debt obligations stood at 620,791 euros. New arrears of up to 30 days amount to 240,131 euros, including 117,611 euros in tax debt. The remaining tax payment deferral totals 183,788 euros, while the debt to heating company Utilitas Valka reaches 172,725 euros.

Although the Cabinet of Ministers decided on May 19 to reduce the municipality's June 20 principal payment by 215,535 euros, new arrears in both regular taxes and deferred tax payments emerged over the summer, creating additional budget costs.

Ministry's appeal

The FM says agreements with creditors only postpone obligations and generate extra expenses rather than solving the problem. The municipality has also failed to fulfill tasks set in the Cabinet's May 19 decision, and the information it provided does not give confidence in its ability to stabilize finances. The ministry has therefore called on the Valka municipal council to decide by September 30 on launching a financial stabilization process, noting it has repeatedly requested this since 2025.

The postponement of a 431,070-euro state loan principal payment from September 20 to October 20 is described as a temporary support measure, intended to preserve funds for the municipality's core functions until stabilization begins.

Council's position

Latvian Television's "Panorama" program reported that the Valka municipal council plans to reject the ministry's call, arguing there are no signs requiring a stabilization process and that the FM's data is outdated. The State Audit Office has launched an in-depth audit of the municipality's finances. If the council does not decide on its own, the FM plans to ask the Cabinet to decide on further action based on the audit's findings.