Latvia’s general government debt and interest expenditure levels relative to GDP remain among the lowest in the European Union (EU) and the euro area.
Credit rating agencies assess Latvia’s general government debt and debt servicing costs as moderate compared to Latvia`s rating peers.
At the end of 2025, the central government debt (according to the national methodology) amounted to EUR 20.5 billion, increasing by EUR 1.4 billion over the year.
The increase in government debt was driven by budget deficit, which was impacted by the increase of defence expenditures. The increase in defence spending in 2025–2028 will be financed through the activation of the national escape clause under the Stability and Growth Pact for 16 EU countries (including Latvia). This clause allows EU Member States to increase defence spending while still complying with EU fiscal rules.
The government has agreed to increase defence spending in a way that ensures the general government debt does not exceed 55% of GDP. With this approach, government debt will continue to be maintained at a moderate and sustainable level, ensuring the refinancing of debt obligations under optimal conditions.
Government bonds make up the most of the central government debt portfolio. In 2025, all debt portfolio parametrs were in line with the Central Government Debt and Cash Management Strategy.
