Riga- The Latvian government plans to cut spending by 263 million lats (577.6 million dollars) to keep the 2008 budget at a 0.5-per-cent surplus of gross domestic product (GDP), the government decided during an extraordinary session on Thursday.

Each ministry will have to cut 5.9 per cent of expenses, Minister of Interior Mareks Seglins told journalists following the session. The government also plans to eliminate existing job vacancies and decrease state purchases.

Facing a sharp economic slowdown, the government needs to cut the budget by 106 million lats just to balance it, Finance Minister Atis Slakteris said ahead of the government session.

With the slowing economy, tax revenues have fallen below expectations. The budget was drawn up with a forecast for growth in GDP of 7.5 per cent for 2008 and 2009.

However, first quarter growth in 2008 was 3.3 per cent, and some forecasts suggest the possibility of a shrinking economy this year.

The 2008 budget has planned revenue of about 5.5 billion lats and spending of 5.3 billion. (dpa)