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The Convergence Programme of Lithuania of 2007 has been Approved at the Government Session

Date

2007 12 19

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Vilnius, December 19. Today the Convergence Programme of Lithuania of 2007 was approved at the Government session. The draft Convergence Programme has been developed based on the material presented by institutions, the development process has been coordinated by the Ministry of Finance. The Programme presents tightened fiscal deficit targets for 2009 – 2010, in 2009 it is planned to structurally balance the budget (the budget would be balanced after drawing out temporary revenue due to cyclic economic growth), and in 2010 to make efforts to have a structural excess. The Programme also stresses strengthening of fiscal discipline by further developing the State budget planning in medium-term.

Rapid and sustainable real Lithuania’s convergence – approaching productivity and revenue level of the euro area countries – is an economic policy priority. The Convergence Programme of Lithuania of 2007 projects economic policy, which is formed in the Republic of Lithuania Law on Financial Indicators of the State Budget and Municipal Budgets for 2008.

The Convergence Programme presets the analysis and evaluation of current environment presumptions for the pursuit of economic policy goals. Lithuania’s economic development projections are estimated by making an assumption that during the reporting period credit demand will be based on comprehensive knowledge on economic perspectives and, therefore, it is anticipated that the economy will gradually reduce dependence on borrowed funds. The stand was made on the assumptions for euro exchange rate, oil prices and prices of other raw materials that were taken into account by the European Commission in the preparation of economic indicator projections. The assumptions for the implementation of the Programme were supplemented by the Republic of Lithuania Law on Fiscal Discipline, which obliged that in 2008 general government deficit should not exceed 0.5 per cent of GDP and to seek for close to balanced or excessive general government in medium term, and also provided for digital and procedure rules to endeavour it.

Updating the Convergence Programme, the consideration was given to the assessment of the Convergence Programme of Lithuania of 2006 made by the European Commission and based on it the opinion adopted by the ECOFIN Council. It was proposed to strengthen efforts with regard to reduction of deficit in structural terms, to seek possibly lower general government deficit.

Implementing the Convergence Programme, the efforts will be further made to implement the fiscal policy objective formulated in the Convergence Programme of Lithuania approved by the Government of the Republic of Lithuania – to pursue the balanced budget, to allocate all additional revenue and saved expenditure to fiscal deficit reduction and excess formation, to manage mortgage loan demand through taxes. It is envisaged that, in future, updating the Programme specific additional measures for fiscal risk management will be presented.

The Convergence Programme reconfirms Lithuania’s objective to join the euro area. According to the available data, the best period for joining the euro area starts in 2010.

Fulfilling economic policy coordination with the EU commitments, the Convergence Programme, developed following the legislation adopted before 6 December 2007, will be submitted to the Directorate General for Economic and Financial Affairs of the European Commission.

This is not the first year when the parliamentarians also participate in the consideration of the Convergence Programme, thus, the Programme was also discussed at the joint meeting of the Budget and Finance Committee and the European Affairs Committee of the Seimas (Parliament).

In February-March 2008 the Convergence Programme of 2007 will be considered at the ECOFIN meeting.

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Convergence Programme is a document provided for in the Treaty establishing the EU, where the latest information of on-going and planned budgetary and tax policy is presented following the requirements laid down in the Code of Conduct of the European Commission. The Programme is constantly updated. The information presented in it has to be based on adopted legislation. The governments of the EU Member States are responsible for development and update of the convergence programmes.

The Programme surveys recent economic developments in Lithuania, presents monetary and budgetary policy plans for medium term, assesses risk factors, informs about national quality criteria for general government finances and present Lithuania’s preparation to overcome aging society consequences, also reviews structural reforms having a huge impact on government finances. It also presents the assessment of economic cycle impact on public finances.

 

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