Late last month, the Latvian Parliament backed budget cuts of almost $1 billion that will reduce pension payments and public sector salaries. The country is seeking to unblock 1 billion euros, or $1.4 billion, of international aid from the International Monetary Fund and European Union.
The disbursal of aid was contingent on putting government finances in order, and the severity of the budget cuts needed to meet that goal has increased as the economy has worsened.
The international lenders want Latvia to bring the budget gap down to about 4 percent of gross domestic product this year and next, and to install a longer-term plan to meet European Union rules limiting budget deficits to 3 percent of G.D.P.
Link to the article:
This article was in the June 29 issue of the News Feed.
For some time now we have been pondering a question that is not raised in this article.
The question: At what point do the international financial authorities down play budgetary constraints in response to healthcare needs?
This article serves only as a springboard to the question. Though Latvian Health Minister Ivars Eglitis may think he is taking a bold stand by resigning his post, he’s simply playing politics. Playing politics to protect a bloated ministry.
Mr. Eglitis states the number of hospitals will be reduced in the future. Ah, yes this is necessary. Currently Latvia’s bed count per 10,000 people is 76. Poland’s is 52 and the US is 32.
But metrics such as the number of beds per citizens, length of stay, and so on are essentially data points that support generalized comparisons between countries.
The question being raised is, how will budget deficit manipulation impact a country’s health care system?
Answer – very positively for private healthcare players, given a maturing emerging economy.
This has been the basis for the private sector’s growth in the CEE region for the past 10 years. And with 2+ million people, and little private play in healthcare, Latvia is a focus.
However, imposing budget deficit maximums at the expense of a country’s healthcare spend is problematic in frontier markets. It simply means a large majority of that country’s citizens will be able to access only the most rudimentary of healthcare services for years to come.
The issues of budget deficit management and healthcare spend are strongly linked. And rightfully so. The historic examples of extreme deficits are widely known. Loan forgiveness as the cause de célébrité for rock music concerts can only go on for so long.
At issue, can an emerging market, or a frontier market, support budget deficit constraint (as a precondition for international monetary support) at the expense of its healthcare sector?
Yes….and no……….. In early July Latvia agreed to the 3% deficit cap…….HK