Seimas to consider amendments to the Constitutional Law on the Implementation of the Fiscal Treaty
After the submission, the Seimas started to consider the draft amendment to the Constitutional Law on the Implementation of the Fiscal Treaty prepared by the Ministry of Finance, which transposes the provisions of the EU Directive, at the same time updates the national rules on fiscal discipline and aligns with the new EU economic governance framework.
According to Minister of Finance Kristupas Vaitiekūnas, these are extremely important and necessary changes in order to transpose the provisions of the new EU directive* defining the medium-term budget formation.
“By transposing the directive into national law, national fiscal discipline rules are harmonized, which will both increase fiscal space and preserve the sustainability of public finances, and simplify the system – instead of several indicators, one main rule will be established – limiting the growth of budget expenditure, on average about 5% per year”, Minister of Finance K. Vaitiekūnas said presenting the proposed draft law in the Seimas Plenary Chamber on Tuesday.
Fiscal discipline simplified
The fiscal governance system, which also covers medium-term budget planning, is linked to one clear rule of fiscal discipline – management of general government expenditure.
Expenditure – a budget indicator that can be directly influenced by fiscal policy (or, revenue and expenditure policy) decisions and its monitoring would be based on statistical data.
This indicator will become the basis for assessing budget sustainability both at national and EU level.
This will allow for the abandonment of the currently complex multi-level system of fiscal discipline rules and will ensure that budget planning would be clearer, more transparent and easier to project.
The proposals, while increasing the fiscal space, preserve the sustainability of public finances (remaining a debt threshold of 60% of GDP and a deficit threshold of 3% of GDP).
Investments promoted
Currently, the fiscal discipline rules do not provide for conditions specifically designed for investment.
Given that it is of utmost importance for Lithuania to strengthen its economic potential through sustainable investment, the amendments create opportunities to increase investment in the future and stimulate economic growth without violating the fiscal discipline rules applied by the EU.
Moreover, the fiscal discipline rules provide for the possibility of temporarily exceeding the limits on expenditure growth when the state of the country's finances is facing generally recognized challenges, such as the current need to increase investment in the national defence.
Greater transparency and responsibility
It is proposed to introduce an automatic compensation mechanism for deviations from compliance with the rules, if the expenditure growth limits are exceeded, the deviation would have to be offset in subsequent budgets.
The principle of “taking into account or explaining” is also established. The application of this principle means new procedural rules for fiscal discipline, and their implementation will be monitored by the National Audit Office, which performs the functions of an independent fiscal institution.
What is new is that the Government and municipalities, having received the conclusions of the independent fiscal institution, will have to either take them into account or publicly explain why they do not take them into account. This new procedural rule will significantly contribute to increasing the transparency of fiscal policy decisions.
New opportunities for municipalities
The amendments to the law are in favour of municipalities in self-management of their finances. The municipal budget balance requirement will not depend on the state of the economic cycle, which will create conditions for a more predictable budget policy.
In addition, the maximum possible annual deficit limit is increased from 1.5% to 4.5% of the municipality's revenue, accordingly, wider opportunities for implementing larger-scale investments and other projects.
The proposals of municipalities were also taken into account and the limit of guarantees that municipalities can provide is doubled, from 10 to 20% of the municipality's revenue. The revenue base, from which the indicators of guarantees, debt, balance sheet and the use of the relevant limits are calculated, is also increased. This base becomes the largest possible, it consists of all municipal income (including grants).
* COUNCIL DIRECTIVE 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States, Council Directive (EU) 2024/1265 of 29 April 2024 amending Directive 2011/85/EU on requirements for budgetary frameworks of the Member States.
Last updated: 20-10-2025
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