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Troubled budget passes

  • 2001-12-20
  • Tassos Coulaloglou
VILNIUS - Lithuania's 2002 budget, passed on Dec. 13 with 72 MPs in favor, 51 against and two abstentions, has sparked strong criticism and calls for wide ranging constitutional reform.

With revenues projected at 8.8 billion litas ($2.2 billion) and expenditure at 9.94 billion litas, the budget deficit comes to an ever-growing 1.13 billion litas.

Liberal MP Gintaras Steponavicius is concerned with the way that the government is growing and believes concrete steps need to be taken to ensure a balanced budget as well as a smaller state.

"It's completely unacceptable that the budget was passed with an increase in spending by the government. This will mean higher taxes and a bigger state. We already have a growing deficit, and we want to see this trend stopped." Steponavicius and his whole Liberal faction voted against the budget.

President Valdas Adamkus himself in a televised speech called the budget something not easily acceptable for the Lithuanian people. "Unfortunately, it doesn't comply with the promises of politicians or the expectations of society."

One of the most serious issues surrounding this draft budget is its constitutionality. Lithuanian law stipulates specific guidelines for the allocation of money based on a percentage of the GDP.

Agriculture, which by law is supposed to receive 10 percent of the GDP, received about 8 percent. This and other discrepancies between the law and the budget have many believing it is time for change.

The constitutionality of the 2001 budget is currently being challenged in the Constitutional Court, while in another case the court is considering a claim by Lithuania's Finance Ministry that the laws stipulating proportions of GDP to be spent in particular areas are themselves unconstitutional.

"We think the laws are discriminatory toward other sectors of the economy where funds may be better allocated," said Finance Minister Dalia Grybauskaite.

According to Remgijus Simasius, policy analyst for the Lithuanian Free Market Institute, "it is really unclear what is constitutional or not right now. We really have to wait and see what the court decides, but one thing is clear, this budget is the same as in previous years."

Currently a number of minority parties are complaining that particular spheres will not receive as much as they should. "This budget doesn't allocate funds according to our priorities, said Christian Democratic MP Kazys Bobelis. Bobelis believes the laws regarding percentages of GDP to be spent in certain areas should be not be scrapped altogether, but in some areas the spending stipulations should be changed.

"In education it was 5 percent of GDP, but now it's only 4.1 percent, lower than what should be allocated. For agriculture it should be 10 percent, but now it's around 8 percent. These are unacceptable numbers that need to be changed."

Liberal MP Steponavicius also expressed his displeasure that more money was not spent on education and health care and that badly needed reforms were being avoided. "Our social system is not getting any concrete reforms," he said. "We aren't creating more possibilities for private firms to enter the market and pension reform has been postponed until 2004."

However, Grybauskaite defends her government's record on reform. "Seventy-five percent of GDP is in the private sector, meaning we're in line with countries in the EU like France and Germany," she said.

One of the biggest demands by minority parties in the Parliament was a fundamental overhaul of the outdated and overly bureaucratic tax system. President Adamkus himself said tax reform should be a major priority in the coming year.

"First of all we need to reform our tax system. The budget only accounts for a small portion of GDP not because our taxes are small but because our tax system is filled with loopholes and exceptions," said Adamkus.

Bobelis was also on the offensive, criticizing the corruption of tax officials and the standard income tax rate of 33 percent, which, he said placed an unfair burden on the poor.