Lithuania's national debt to rise rapidly until 2030, finance minister says

VILNIUS - Lithuania's national debt will grow rapidly until 2030 but could decline thereafter as defence and infrastructure projects are completed, Finance Minister Taurimas Valys said.

"According to current projections, the debt will reach about 54 percent of gross domestic product in 2029. This is a significant increase. A large part of it is driven by the decision to develop defence capabilities more quickly, but the costs of building them and maintaining them later differ. Once the largest acquisitions and infrastructure projects are completed, the need for initial investment will decrease. Together with stable revenue and economic growth, this would create conditions for reducing the debt-to-gross domestic product ratio after 2030," Valys said on Friday.

The draft 2027-2029 budget, approved by the government on Friday, projects general government debt at 48.2 percent of gross domestic product next year, rising to 50.7 percent in 2028 and 54.3 percent in 2029.

This indicator will remain below the Maastricht criterion of 60 percent applied to European Union member states.

According to Finance Minister Taurimas Valys, rising debt servicing costs are included in the budget calculations. Based on the methodology used by the Finance Ministry, these costs are expected to increase from 753 million euros this year to 1.12 billion euros next year, 1.35 billion euros in 2028 and 1.62 billion euros in 2029.

State Auditor Irena Segaloviciene previously told parliament that debt servicing costs would reach almost 2 billion euros in three years. According to the Finance Ministry, calculations using the methodology applied by the State Audit Office put the costs at 1 billion euros this year, 1.38 billion euros next year, 1.68 billion euros in 2028 and 2.13 billion euros in 2029.

Valys stressed that the differences in the figures stem from the calculation methodologies and do not change the actual size of the expenses.

Deputy Finance Minister Lineta Jakimaviciene said Lithuania plans to borrow 10.5 billion euros next year. "These funds would cover the 5.7 billion euros needed to finance the state budget deficit, 4.2 billion euros for debt repayment, and other goals," she said.

The government on Friday approved next year's draft state and municipal budgets and submitted them to parliament. The general government deficit is projected to reach 3.8 percent of gross domestic product, exceeding the European Union's 3 percent Maastricht criterion.

Valys said the deficit could be reduced once geopolitical tensions ease, for example, if the war in Ukraine is frozen and the conflict in the Middle East is resolved. According to the minister, investments are expected to boost economic growth and help bring the deficit into balance.

More than 4.8 billion euros, or 5 percent of gross domestic product, is proposed for defence. State budget revenues, including European Union funds, are expected to reach 22.2 billion euros, up 5.2 percent from this year, while expenditure is projected at 27.9 billion euros, an increase of 1.3 percent.