VILNIUS - As part of the International Monetary Fund (IMF) approved anti-crisis plan, the government has decided to sell its remaining 9.98 percent stake in the Mazeikiai oil refinery to generate funds to prop up Lithuania's ailing economy.
Pending Seimas approval of the sale, Polish oil company PKN Orlen is expected to buy the stake of Lithuania's only oil refinery some time over the Christmas period for around $284.45 million.
SEB Analyst Gitanas Nauseda told The Baltic Times this is a good way to raise capital for the state in hard times.
"It is a good idea to sell Mazeikiu Nafta because the market price of this is good at the moment and favorable for Lithuania. It will help to create the Stabilization Fund. We only had a 10 percent share and we couldn't influence anything there, so this is an economic decision," he said.
Ministry of Economy Undersecretary Ancietas Ignotas said the sale would produce funds to help deal with the economic crisis.
Kestutis Glaveckas, chairman of parliamentary budget and finance committee, said the sale of Lietuvos Dujos, the state gas company, was also being considered to free up funds, though the possibility was still unlikely.
Glaveckas echoed Nauseda, saying that the funds would help stabilize the country.
"This is necessary in order to form a 'financial cushion.' We now have 1.03 billion litas (298.55 million euros) in the Stabilization Fund and approximately 300 million litas in the Privatization Fund, which is not sufficient for stabilizing the situation in the country. Now it is a very good time to sell 10 percent of Mazeikiu Nafta," he said.
The Cabinet intends to instill safeguards and oblige PKN Orlen to address the government should it decide to sell Mazeikiu Nafta in future.
The visiting mission of the IMF has given its support to the anti-crisis plan worked out by Lithuania's new government, but warned that it may need retuning in the near future.
"IMF supports the anti-crisis plan, yet the Fund has warned that those measures might not suffice, and the authorities may have to review the budget before the middle of next year. We have agreed that the risks are very big, while the chances that the financial markets, and effectively the whole economy, will recover are meager," Glaveckas told the Baltic News Service.
"Thus we will have to search for the sources of borrowing both abroad and domestically, via the issue of state securities and saving certificates and the use of Privatization Fund resources," he said.
Lithuania is expecting its GDP to drop by about 4.8 percent in 2009 and experts have predicted that the economy will only return to growth in 2011.
Lithuania would probably borrow funds from Japan or China if needed.
Prime Minister Andrius Kubilius admitted that the government might have to further tighten its anti-crisis measures, including pursuing additional cost reduction and looking for potential sources of additional budget revenues.
As planned by the Cabinet, Lithuania's budget deficit will reach up to 1 billion litas in 2009.
Nauseda reported that SEB Bankas expects 2 percent contraction in 2009 and 2010. He said the plan could be altered soon.
"Probably the cut in public expenses should be higher. Personal income tax cuts should have been more modest. We have to see if the current forecasts are right first," he said.
The value-added tax, which is the single largest source of revenues, is expected to generate 9.94 billion litas in revenue next year, or around 38.5 percent of the total national budget revenue.
Personal income tax revenue is projected at 4.91 billion litas, or 20.2 percent of the overall revenue. Another 4 billion litas, or 16.5 percent, in revenue should come from excise taxes.