Pandemic borrowing pushes Lithuania’s deficit to 8–9 percent of GDP

 

Pandemic borrowing pushes Lithuania’s deficit to 8–9 percent of GDP

Lithuania’s budget deficit will reach 8–9 percent of GDP this year due to increased borrowing during the pandemic, an adviser to the country’s president said on Thursday.

The budget deficit was justified during the Covid-19 crisis due to the need to absorb shocks to the economy and retain jobs, Simonas Krėpšta, adviser to President Gitanas Nausėda, told LRT RADIO.

In spring, the Lithuanian government upped the state’s borrowing limit to 5 billion euros. In 2019, Lithuania reported a budget surplus of 0.3 percent of GDP.

“Deficit control is essential. This year, the deficit will definitely reach perhaps 8 or 9 percent [of GDP] but, in the president’s view, a downward trajectory should be evident,” he said, adding that the deficit next year should fall to 5–6 percent of GDP.

“Next year, the deficit should be smaller and should come close to the balance in several years’ time,” said Krėpšta.

“We may have a balanced budget and, eventually, a certain surplus in order to be able to get ready for another crisis as we see that crises do occur, in one or another form, once in 10–15 years,” the presidential advisor added.

Next year, the budget should be focused on economic transformation, defence, the efforts to reduce social exclusion and income inequality by increasing non-taxable income gradually, as well as on the indexation of pensions at a rate exceeding the rate of wage growth, Krėpšta said.

The government will next week consider the budget bill for 2021, which should be handed over to the Seimas by October 17. The bill will be adopted by the newly elected parliament.

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