Bloomberg News

Lithuanian Cabinet Approves 2013 Budget Cutting Deficit to 2.5%

October 16, 2012

Lithuania’s government approved the 2013 budget draft with a deficit within the European Union limit of 3 percent of economic output.

Prime Minister Andrius Kubilius’s Cabinet, which may be ousted after parliamentary elections this month, proposes cutting the shortfall to 2.5 percent of gross domestic product from this year’s planned 3 percent, his office in Vilnius, the capital, said in an e-mailed statement today. The bill will now go to parliament for approval.

Opposition parties lured voters with pledges to boost wages and trim sales levies to oust Kubilius, whose austerity measures worsened the Baltic nation’s deepest recession in 2009 and 2010. Kubilius’s Homeland Union-Christan Democrats is third before second-round voting in single-mandate districts on Oct. 28.

The draft budget projects revenue, including aid from the EU and other international bodies, of 28.8 billion litai ($10.9 billion), with spending planned at 29.5 billion litai, leaving a gap of 697 million litai. GDP will grow 2.5 percent this year and 3 percent in 2013, the Finance Ministry estimates.

The heads of the opposition Labor and Social Democrat parties, who placed first and second in the first round of parliamentary elections on Oct. 14 and plan to work together in a new coalition, said in news conferences yesterday that they would seek to stimulate the economy without letting the fiscal deficit exceed the EU limit of 3 percent of GDP.

Separately, the Finance Ministry said today that Lithuania would need to borrow about 7.6 billion litai on domestic and international markets next year, including 6.7 billion litai to repay previous debt. A debt-repayment reserve of 2.1 billion litai has been built up to reduce refinancing risk, the ministry said on its website. It projected that government debt at the end of 2013 would be about 40.5 percent of GDP.

To contact the reporter on this story: Bryan Bradley in Vilnius at bbradley13@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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