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Lithuania’s Convergence Programme aims at Deficit Reduction and Debt Stabilisation

Date

2010 02 22

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Vilnius, February 24. Lithuanian Government approved updated Convergence Programme of Lithuania 2009. The Convergence Programme is updated with the view to Council Recommendation to Lithuania to extend the deadline of the excessive deficit correction until 2012.

The updated Programme provides information on the measures implemented in 2009-2010 in consolidation of general government finances and highlights the potential of the country to stabilise the general government debt. Convergence Programme sets general government deficit targets: for 2010 – 8.1 per cent of GDP, for 2011 – 5.8 per cent of GDP, for 2012 – 3 per cent of GDP. To strengthen financial markets confidence in Lithuania’s commitment to maintain a low government debt over several decades’ perspective, a new, more stringent medium-term objective is set after year 2012 – to achieve annual structural general government surplus of about ½ per cent of GDP. The medium-term objective is tighten taking into consideration the estimations by the European Commission demonstrating that in case of neglecting to pursue strict fiscal policy plans, the general government debt would approximate 113.9 per cent of GDP in 2030, while in 2060 it would approximate 545.9 per cent of GDP.

Taking into consideration general government deficit targets set, it is projected that in 2010 the general government debt will make up 36.6 per cent of GDP, in 2011 – 39.8 per cent of GDP, in 2012 – 41 per cent of GDP.

The Convergence Programme includes reiteration of Lithuania’s strive for joining the euro area immediately after the country meets the convergence criteria.

The Convergence Programme is based on the main short-term objective of the Government– to tackle the economic crisis and its consequences. The key strategic objective of the medium-term policy is further public finances consolidation and essential improvement of the situation in the areas that can ensure economic breakthrough.

Programme overviews economic changes in Lithuania over recent years and sets medium-term economic policy guidelines, while assessing risk factors, quality of general government finances and Lithuania’s readiness for overcoming consequences of population ageing. While implementing structural reforms, the priority will be given to those measures, which would enable an efficient reduction Lithuanian economy’s dependence on imported goods without losing productivity. This will enable reduction of the structural current account balance by preserving the potential of national revenue for internal consumption and investment crediting.

Convergence (convergence with the euro area) Programmes are developed by the EU Member States, where the single EU currency euro is not introduced. In the annually updated Programmes the Member States provide legal commitments for 3 forthcoming years to implement the measures necessary for ensuring financial stability.

 

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