Despite recent progress, the perceived effectiveness of the public administration remains low. To reduce the administrative burden and raise public spending efficiency it is key to further simplify and digitalise administrative procedures and improve data sharing and policy impact evaluation.
Over the past decade, Latvia has implemented significant reforms that have strengthened the rule of law and improved the business environment. The establishment of the Economic Court in 2021 has improved the efficiency of judicial proceedings. A comprehensive anti-corruption and anti-money laundering framework as well as strict party financing and conflict-of-interest rules have bolstered institutional integrity. However, overlapping functions, weak coordination and skill shortages continue to weigh on government efficiency and increase administrative burdens (Figure 1). Despite improved digitalisation of public services, limited data sharing across the public administration still complicates the implementation of one-stop shops for administrative procedures. Improving public procurement and infrastructure delivery and strengthening municipal capacities is also key for raising spending efficiency.
How can Latvia improve public administration capacity to support fiscal sustainability and economic growth? The 2026 Economic Survey of Latvia identifies four priorities:
1. Improve the organisation of the public sector to strengthen administrative capacity
Overlapping functions among ministries and public agencies create administrative burdens and raise fiscal costs. Compensation of government employees remains above the OECD average as a share of GDP, which partly reflects relatively high wages for lower-skilled public employees and rising public employment (Figure 2). High turnover, particularly for skilled professionals and managers, and low digital and management skills have weakened institutional memory and the quality and effectiveness of public policies. Conducting thematic and cross-sectoral functional audits with a view to consolidate public bodies would help identify overlaps and reduce the public wage bill. To reduce operational costs and improve service quality, the planned shared service centre of the central government should be implemented, and its use should be made mandatory, with facilitated access for municipalities. Continuing to improve compensation for mid‑level managers and professionals and expanding training opportunities would help attract and retain talent and adapt to changing skill needs.
2. Further leverage digitalisation to reduce administrative burdens, strengthen policy impact evaluation and improve spending efficiency
Latvia has made important progress in digitalising public services for firms and households, simplifying business registration and certain licencing and permitting procedures. However, fragmented IT systems and weak data sharing across the public administration create administrative burdens, lead to repeated information requests and hinder the implementation of one-stop shops. Reporting requirements for firms and households remain substantial, while inspections are often not risk based. Accelerating the implementation of the central data exchange platform by improving data quality, and strengthening policy impact analysis are key for reducing administrative burdens and improving spending efficiency. Better use of data could also help target inspections and ensure that reporting requirements are proportionate to risk. Improving stakeholder engagement to review, simplify and reduce existing regulations and administrative procedures should be another key priority to reduce administrative burden for all firms.
3. Improve public procurement and infrastructure planning procedures
Well-functioning public procurement is key for delivering high-quality public services, ensuring efficient use of public resources and supporting competitive markets. Latvia’s public procurement spending as a share of GDP exceeds the OECD average (Figure 3). Given rising spending pressures from defence, health, education and social protection, raising the efficiency of public procurement is key to strengthen public finances. Procurement of many standardised goods and services remains decentralised, despite significant potential efficiency gains from centralised procurement. Consolidating purchasing bodies and extending the list of goods and services that have to be procured centrally should be combined with measures to reduce the administrative burden involved in procurement procedures, raise transparency and foster competition. Moreover, weak infrastructure planning, including limited stakeholder participation, and risk management have led to significant cost overruns and delays in major infrastructure projects, such as Rail Baltica. Using cost-benefit analysis for all major infrastructure projects and improving risk management in infrastructure procurement would support the cost-efficient planning and implementation of large infrastructure projects.
4. Improve the administrative and financial capacity of local governments
In Latvia, municipalities are responsible for a wide range of public services, including the issuance of commercial permits and licenses, law enforcement, utilities, public transport, housing and local economic development (OECD, 2025). Skilled labour shortages and financial constraints have weakened administrative capacity and public service quality in many municipalities, prompting an administrative-territorial reform in 2021. Despite the reform, capacity constraints persist in sparsely populated and remote areas, especially as additional tasks were delegated to municipalities in 2026. Improving cooperation across municipalities and transferring administrative tasks that require less local counselling to the central government would help strengthen local administrative capacity. Moreover, revenue from recurrent taxes on immovable property, allocated to municipalities, remains low. Updating cadastral values with market values and raising property tax revenue, while continuing to provide tax deferrals to cash-poor homeowners, would strengthen municipal finances and help reduce income and wealth inequality.
References
OECD (2026), OECD Economic Surveys: Latvia 2026, OECD Publishing, Paris, https://doi.org/10.1787/34d15460-en.
OECD (2025), Government at a Glance 2025, OECD Publishing, Paris, https://doi.org/10.1787/0efd0bcd-en.