Borrowing for defense would cost EUR 1b in interest over decade – Lithuanian defmin

  • 2024-01-29
  • BNS/TBT Staff

VILNIUS – Lithuania is also looking into borrowing to fund its defense, among other options, Defense Minister Arvydas Anusauskas says.

In his words, borrowing would cost the state budget around 1 billion euros in interests over a decade, if the country borrowed enough to meet the needs of its national defense system.

"There are all sorts of proposals (...), and yes, one of them is borrowing, but it would cost one billion euros per decade to repay the debt. This (money - BNS) amounts to the need we have now," Anusauskas told reporters on Monday as a meeting on defense financing is taking place at the government office on the prime minister's initiative.

"The discussion is productive because everyone sees not only the needs but also where the taxes can come from by changing them," he said.

The need for defense funding is growing because of Lithuania's plans to host a German brigade, to create a light infantry division by 2030 and to increase the number of young people called up to serve in the army, Anusauskas said.

In his words, the need for funding would change if some projects were to be implemented under a public-private partnership. However, according to the existing data, an additional 400 million euros would be needed to implement the aforementioned projects already next year.

This would bring defense funding above 3 percent of GDP, compared to the existing 2.75 percent, he said.

The defense sector will get around 2.52 percent of GDP from the regular budget appropriations this year, and the rest will come from the bank solidarity levy that is set to expire next year.

Anusauskas says the next three to four years will bring the biggest challenge for financing the national defense system "after which the pressure will ease".

Politicians are also looking into the possibility of increasing the VAT, Anusauskas said but he refrained to comment on this in detail.

"We are discussing all ways", he said, but refused to give his personal opinion on how he would propose to increase funding for national defense.

Lithuanian Prime Minister Ingrida Simonyte on Monday is meeting with political party leaders, business representatives, and trade union officials to discuss defense funding. Simonyte organized the meeting in an effort to find a solution on how to finance national defense after the two-year windfall profit tax on banks expires.

The prime minister convened the meeting to discuss what proposals could be tabled to the parliament in the spring session to ensure that resources for national defense can be planned for 2025.

Simonyte said earlier the aforementioned army plans would need additional funding of around 0.4-0.5 percent GDP on top of the 2.52 percent of GDP, already agreed by political parties.