Austerity plan pays off

  • 2009-04-22
  • By TBT staff
VILNIUS - The government's austerity measures appear to be working following a Finance Ministry press release saying that 330 million litas (96.57 million euros) more than usual was flowing in to government accounts in the first quarter of 2009 due to the tax reforms put in place on Jan. 1.
From January to March this year, the state budget saw about 75 million litas from excise duties, 184.8 million litas from value added tax (VAT) and 86.5 million litas from profit tax.
The state budget, however, received lower than expected revenues from resident income tax at 16.7 million litas.

The tax reforms are expected to bring in additional revenues of about 1.3-1.5 billion litas to the state budget during the year.


The prime minister has also announced that businesses would start to see changes that would let them work more easily.
"We would like business to start living in Lithuania under the conditions of a tropical climate for the entire year," Prime Minister Andrius Kubilius said after a sitting of the working group on the supervision and coordination of the implementation of the economic stimulus plan on April 18.

Kubilius said the real spring for the business sector would start on April 28 or 29, when the government plans to sit again to focus on the improvement of conditions for the business sector.
The government plans to cancel 61 restrictions on businesses, such as the requirement to present documents that are already possessed by other official institutions, to shorten the time of the registration of authorized capital, to facilitate the investment conditions, to shorten and simplify the procedures of public procurement and more.

An aide of Kubilius told TBT that the moves were part of a plan to streamline the business environment.
"It will be an optimization of these institutions."
The Competition Council will also be addressed with a request to abandon bureaucracy and pay more attention market regulation.
Businesses in the country have begun to see the money from the government stimulus package, which was rolled out last month.

Largely thanks to the 3 billion litas stimulus package, Economy Minister Dainius Kreivys forecasted that the business sector could start recovering in the second half of this year.
About 20 million litas of the stimulus package has already been allocated to stimulate the business sector through Ukio Bankas and Siauliu Bankas.


Meanwhile, government policy dissenters have been questioning whether any more stimuli, which would require taking a loan from the International Monetary Fund (IMF), would be wise for the country.
 At a discussion titled "The IMF: Bankruptcy or Rescue for Lithuania?" Audrius Butkevicius, a representative of Zalgiris National Resistance Movement, inquired where Lithuania should put the borrowed money, since the funds that had been already borrowed "did not seem to stimulate the economy."

Butkevicius asked if there was no alternative to avoid taking a loan from the IMF, adding that in the event the country was forced to borrow, it should only use the money for stimulation of the business sector, not for consumption.
The question was raised at the discussion, which also featured an economist from Latvia who imparted his country's experiences so far following the closing of the IMF loan.

Latvian economist Dmitrijs Smirnovs criticized the Latvian government for not providing sufficient information about utilization of the borrowed money and for the decision to allocate approximately 1 billion euros for saving Parex banka.
He advised directing all loans to production, especially exports. According to Smirnovs, if Lithuania is granted a loan of 5 billion euros, it would use the money most efficiently by investing it in the erection of a new nuclear power plant.

"If one wants to take a loan, before that he must answer the question of how he will repay the loan. We were overwhelmed with consumption psychology, which caused this financial crisis. How the government will manage to return the money to the IMF, if it was only taken to settle the deficit-ridden budget, it is a way to bankruptcy of the country," the economist said.

"The IMF gives loans only to force the country to go under. It destroys industry and agriculture, so that people cannot find jobs in their country. Why should they develop the Latvian or Lithuanian industries if they have their own industries?" the economist told ELTA.

"The fund weakens the economic and social life of the country, so that young people have to go abroad and work there. I do not think that the IMF can strengthen the political dependence of the Baltic states on the West, since they are already dependent on Washington and Brussels," he said.
Smirnovs said Lithuania will face the same problems as Latvia if it takes a loan from the IMF.
The issue came to the fore recently after analysts predicted the need for assistance in the near future from the IMF.

Juozas Olekas, a member of the Social Democrats Seimas group, said the Social Democrats proposed that the government find out all the details concerning Lithuania's possible borrowing from the IMF as soon as possible.
According to him, the situation after the G20 Summit in London has changed 's the IMF is simplifying the borrowing conditions and it is probably possible to direct lower credits not only to fill in the public finance gaps, but also to stimulate the recovery of the business sector.

"We have to know medications and how we will take them. The money must reach the business sector," said Seimas member Irena Siauliene, member of the Social Democrats.