Finance Ministry warns over Valka municipality's finances, council delays stabilization process

Latvia's Finance Ministry contacted Valka municipal council members in early September, urging them to discuss launching a financial stabilization process at their next session, according to Latvian Television's "de facto" program.

The ministry's letter stated that the municipality's financial situation is not improving and that it will be unable to balance its 2026 budget cash flow enough to fully meet obligations to creditors. Such a stabilization process is designed for municipalities facing serious financial difficulties.

Council chair disputes the findings

Valka council chairman Vents Armands Krauklis, of the Vidzeme Party, argues the ministry's conclusions rely on inaccurate data and claims the ministry is ignoring information available to the municipality. He has also criticized state institutions' attitude toward Valka's situation. The council plans to discuss the ministry's letter at a session on September 24, though Krauklis's comments suggest majority support for starting the stabilization process may not exist.

Opposition raises concerns

Opposition council members have expressed concern about the municipality's finances, saying the local government has long relied on borrowing and has delayed unpopular decisions needed to improve the situation.

Finance Minister Māris Kučinskis rejected claims that the ministry acted for political reasons, stressing it had a duty to respond to the municipality's financial state. At the same time, he extended until October 20 a deferral on principal payments for a 430,000-euro state loan issued to Valka, without applying late-payment penalties.

An additional assessment of Valka's finances is expected from the State Audit Office, which is conducting an in-depth audit of the municipality; results are not expected before late October. Currently, the Rēzekne city municipality is the only local government in Latvia in an active financial stabilization process.