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16/11/2015   National Audit Office evaluated the draft budget for 2016

In implementing the functions of the budget policy monitoring authority set out in the Republic of Lithuania Constitutional Law on the Implementation of the Fiscal Treaty, the National Audit Office has carried out the assessment of the Draft Law on the Approval of Financial Indicators of the State Budget and Municipal Budgets for 2016 and submitted the conclusion to the Parliament on the compliance of the structural impetus target. The report “On the Financial Indicators of the government sector of 2016” includes the underlying analysis.

In the Draft Law on the Approval of Financial Indicators of the State Budget and Municipal Budgets for 2016 it is planned to maintain the total public finance deficit around 1 per cent of GDP during 2015-2016. In the opinion of the National Audit Office, while preparing the Draft Law the compliance with the excessive government sector rules is not taken into account, because in case the unfavourable risk factors come true, there will be a significant deviation from structural government deficit of 2016, predicted by the Government.

The Government proposes to the Parliament to establish the 2016- 2018 medium-term objective – structural government deficit, which would not be higher than 1 per cent of GDP at current prices. Due to the fact that Lithuania faces the average long-term sustainability risk of public finances, the lower limit of the medium-term goal must be structural government deficit – 0.5 per cent of GDP at current prices.

The public debt level of the Republic of Lithuania is one of the lowest among the European Union countries, however, the public debt since 2008 until 2014 increased 2.8 times. Over the past few years it has been of fixed level - about 40 per cent of GDP. Due to the fact that continuous improvement of the primary balance is annually postponed into the future steady and continuous reduction of public debt is not ensured. In order to avoid the debt growth in times of economic recession and to decrease the public debt in good times, Lithuania should have a sufficient fiscal space to accumulate sudden shocks. The International Monetary Fund recommends to further continue the deficit reduction and offers the achievable medium-term objective of 0.5 per cent of GDP which would allow to cumulatively decrease the debt level by 5 per cent of GDP over the next few years.

 

Responsible for the information Communication Division
Last updated on 2 February 2016

National Audit Office of Lithuania

Pamėnkalnio St 27, LT-01113 Vilnius, Phone: + 370 5 266 6793, + 370 5 266 6752, Email: nao@vkontrole.lt.