President to propose increasing Bank of Lithuania's contribution to state budget

  • 2025-01-24
  • BNS/TBT Staff

VILNIUS - President Gitanas Nausėda is set to table legislative amendments to increase the share of profit that the Bank of Lithuania transfers to the state's coffers, as part of efforts to boost defense funding, his advisor said on Friday.

Vaidas Augustinavicius, Nauseda's economic and social policy advisor, was speaking to reporters after the president's meeting with Gediminas Simkus, the central bank's governor.

"During the meeting, it was agreed to prepare amendments to the Law on the Bank of Lithuania and adjust the formula used to calculate the Bank of Lithuania's profit contribution to the state budget," Augustinavicius said.

"As a result, the Bank of Lithuania would be able to transfer more money to the state budget," he added. "These amendments could also be submitted by the president."

The advisor emphasized that while the figures have yet to be finalized, the additional amount from the profit contribution is expected to be significant.

Simkus said that he and the president did not discuss how much more the Bank of Lithuania could transfer to the state budget.

According to the governor, the Bank of Lithuania made a profit of more than 20 million euros in 2024. 2023 was not a profitable year, but the central bank also contributes funds to the state in other ways.

"The Bank of Lithuania not only invests but also has clients to whom it pays interest on deposits. One of the major clients is the Finance Ministry, which holds billions (of euros) in the Bank of Lithuania," Simkus told reporters.

"The Bank of Lithuania has set a maximum interest rate, which means that (...) we transferred 110 million euros to the budget as (interest on) deposits in 2023 and 160 million euros last year," he added.

As Lithuania plans to significantly increase defense funding by 2030, Nausėda suggested earlier this week in an interview with BNS that foreign currency reserves could be used for this purpose.

Lithuania's official reserve assets, which exceed 7 billion euros, are held abroad, with nearly half of them consisting of debt securities.

Augustinavicius said the Bank of Lithuania's profit is largely tied to the returns on investments from these reserves.

In his interview with BNS, Nauseda said that Lithuania would need an additional 12-13 billion euros in order to develop a national military division and boost defense funding to 5-6 percent of GDP by 2030, adding that one of the sources could be Lithuania's foreign currency reserves.

However, the central bank stated on Wednesday that direct financing of the government from this source is not allowed under the Treaty on the Functioning of the European Union (TFEU).