VILNIUS - The Lithuanian government's stimulus plan has begun pumping hundreds of billions of litas back into the country's beleaguered economy.
Approved in March, the 5.7 billion litas (1.65 billion euro) plan, derived from a mixture of European Union Structural Funds and private bank loans, provides micro-credit to small and medium-sized businesses and jobs for the country's hard-hit construction sector.
During the past month both Lithuanian banks and the subsidiaries of Western banks in Lithuania began administering the loans. Meanwhile over 200 construction contracts were signed.
"So far the progress has been good," Mykolas Majauskas, an adviser to the prime minister, told The Baltic Times. "Money has been put into the economy."
The government is not handling the loans directly, but instead channeling it through private banks.
"The government has not got the competency or skills to do the risk assessment," Majauskas said. "Banks have those skills."
The purpose of the microfinance initiative is to get money to businesses that are currently struggling but would still be viable if not for the extraordinary clampdown on credit caused by the global crisis.
"You have companies that are on a green light. They are struggling but getting financing. Then there are some yellow lights. They could get money but the banks think they are too risky," Majauskas said.
He said the primary recipients are smaller businesses and export companies.
To help those companies, the government will guarantee their loans. There are different loan programs for different types of companies, and already hundreds of millions of litas have been disbursed to banks.
Dainius Kreivys, Lithuania's economy minister, said banks already approved 30 million litas in loans to 192 small and medium-sized businesses.
The government's goal is to aggressively counterattack the economic downturn that has wreaked havoc on the formerly booming economy. Unemployment reached 11.9 percent in the first quarter of 2009, more than double what it was a year before. Exports are down 30 percent and industrial production is down 20 percent.
"Our choice is between trying to pull and drive the whole economy or following Latvia on its road," Kreivys said.
IF YOU BUILD IT
One of the economic sectors most affected by the crisis is construction. According to the Lithuania's Real Estate Association, two-thirds of all construction companies have been adversely affected so far. The number of construction projects in the first quarter of 2009 was 41 percent lower than the year before.
Real estate prices have plummeted and due to overeager building during the boom and the amount of companies going out of business or forgoing office space to cut costs, tens of thousands square meters of unused office space are lingering unused. Demand for new construction jobs work is low.
To counteract this, the government will use up to 3 billion litas to pay for the renovation of public buildings and privately-owned apartment buildings 's no small task, as the country is full of decaying Soviet-era buildings that need work.
About 1 billion litas in funding will come from EU structural funds and the rest from private banks. Over 200 contracts for renovation of public buildings have been signed already at a value of 513 million litas.
