Oct. 12 (Bloomberg) -- Lithuanian state-owned enterprises should give half of their profits to help trim the budget deficit below the European Union limit of 3 percent of economic output next year, Finance Minister Ingrida Simonyte said.
The government wants to raise two-thirds of the 1 billion litai ($390 million) it needs to narrow the 2012 gap to 2.8 percent from the income of state-owned enterprises and sales of land, Simonyte said in an interview in Vilnius yesterday. The rest would come through 300 million litai from lowering ministerial expenses, she said.
Lithuania wants to adopt the euro in 2014 and must reduce the shortfall from an estimated 5.3 percent of GDP this year. The Baltic nation must also cut the deficit to meet the 2012 deadline set by the European Commission as the shortfall has breached the 3 percent threshold since 2008. Failure to do so may prompt the EU’s executive arm to impose penalties.
“It’s not fair to taxpayers, who are the shareholders of state-owned enterprises, that companies keep profits and have no obligation to share the returns,” Simonyte said. “Legal amendments will require companies to transfer half of their profits to the budget.”
While the Baltic nation’s economy expanded 6.3 percent from a year earlier in the second quarter, the second-fastest pace in the European Union after Estonia, the government may have to contend with slower growth that will curb revenue as Europe’s debt crisis roils financial markets and damps demand across the continent.
The Finance Ministry may lower its 2012 economic-growth forecast from 4.7 percent after the European Commission releases its updated outlook in November, Simonyte said. Additional budget measures would be needed if the new growth estimate sees lower projected revenue, she added.
The government is expected to vote on a 2012 budget draft today and must submit it to parliament by Oct. 17. Legislation on requiring companies to divert a portion of their profits will be submitted along with the budget, Simonyte said.
Enterprises including state railway operator Lietuvos Gelezinkeliai AB, Klaipedos Nafta AB, which operates Lithuania’s oil terminal on the Baltic Sea, and the Klaipeda Port would contribute to the 2012 budget revenue from income made in 2011, she said.
The government also wants state-owned companies that pay dividends to shareholders to raise the amounts set for next year to channel more funds to the budget.
“Given the upside risks to the fiscal deficit, a contingency plan consisting of further measures should be prepared” by the government, James Morsink, the International Monetary Fund’s mission chief to Vilnius said on Oct. 10.
Meeting euro-adoption criteria next year to qualify for a currency switch in 2014 is “possible, but not my central scenario,” he added yesterday in a speech to the British Chamber of Commerce in Vilnius.
Lithuania will meet its 5.3 percent of GDP deficit target for this year, compared with 7.1 percent of GDP in 2010, and the approval of the plan for a 2.8 percent shortfall next year may result in a credit-rating upgrade, Simonyte said.
“There’d be grounds for rating companies to review their present assessment and consider a more positive rating,” she said.
Simonyte said she couldn’t rule out a return to international debt markets with a bond sale this year, though “the current situation in the markets isn’t the most favorable.”
--Editors: Alan Crosby, Balazs Penz
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