2021.10.19 15:52

A year before fiscal tightening, Lithuanian PM warns against boosting budget spending

BNS2021.10.19 15:52

With a year to go before the reintroduction of stricter fiscal discipline rules, Lithuanian Prime Minister Ingrida Šimonytė has warned politicians against boosting next year's state budget spending.

Later constraints on borrowing may come as a shock to public finances, according to the prime minister.

In 2023, the EU is likely to bring back rules that requires member states to keep tthe general government deficit within 3 percent of GDP. The rules have been suspended for the 2020–2022 period to help the bloc weather he economic crisis caused by the pandemic.

"We need to understand very clearly that we will have to return to the same rules from 2023," Šimonytė told BNS in an interview.

"To make sure that this return is not a shock and we do not have to discuss some unpleasant decisions before 2023, I would like the constraints that are in place and the objectives that are politically important [to be] reflected in the budget," she added.

Read more: Lithuanian finance minister rules out austerity measures – ‘no one wants to tighten their belts’

Next year's draft state budget provides for additional spending on Covid-19 pandemic management, education and defence, and for raising public sector workers' salaries and the income of vulnerable groups.

"It seems to me that the budget now has a rather clear logic," said Šimonytė.

The prime minister said that budget spending might still increase slightly on a project-by-project basis.

"There may be all kinds of proposals, [...] but that is always the case. Maybe we have missed something, but [...] it can't really be a significant amount," said Šimonytė.

Lithuania's general government deficit is projected at 3.1 percent of GDP in 2022 and is forecast to narrow to 1.1 percent in 2023 and to 0.5 percent in 2024.

Next year's budget package is being introduced to the parliament on Tuesday.

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