Page 69 - CE Outlook Regions 2022

4.5 Budget and debt - Lithuania

Lithuania's government budget deficit is expected to narrow to 3.1% of
GDP in 2022, down from 4.4% of GDP this year.

The central government's budget revenue is expected to grow by
€1.422bn, or 11.4% to €13.86bn in 2022, while expenditure is expected
to edge down 0.8% to €16.481bn. The Compulsory Health Insurance
Fund's (Sodra) revenue and expenditure for 2022 is balanced at
€2.79bn. Municipal budget revenue will grow by €514.5mn, or 13.7%, to
€4.268bn and expenditure should increase by €512.8mn, or 13.5%, to
€4.312bn.

In 2022, Lithuania’s public spending will focus on national security,
investment in education, and a greener, more innovative, and high
value-added economy. The 2022 budget also includes higher salaries
of education, culture, and social workers, police officers, and other
public sector workers.

The Lithuanian cabinet has approved a minimum wage rise to €730.
The average social security pension will increase by €51 to €465 in
2022, while the average pension of people who have the necessary
minimum length of service will go up by €48 to €489.

The government's latest budget revision in June includes
COVID-19-related fiscal support measures equivalent to 3.4% of GDP,
including a temporary reduction of certain VAT rates and allocating
additional funds for the continuation of the wage subsidy scheme,
healthcare and direct support for companies.

In 2021, the debt-to-GDP ratio is expected to stand at 45.3%.
Thereafter, the debt-to-GDP ratio is projected to fall to 44.1% in 2022
and to subsequently increase to 46.0% in 2023, mainly due to the need
to balance cash flows and prepare for a bond redemption scheduled in
2024.

Lower than initially anticipated projections of general government deficit
levels in 2021 and 2022 are consistent with a downward trend of the
debt-to-GDP ratio. The Lithuania central government debt is projected
to be at approximately €14.9bn in 2022.

Debt sustainability remains underpinned by falling interest costs, a
decline in foreign-currency exposure, and highly favourable financing
conditions, supported by the ECB's asset purchasing programmes.

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