The Seimas Approved Transformation, which Increases Financial Independence of Municipalities
Today, the Seimas approved the draft amendment to the Constitutional Law on the Implementation of the Fiscal Treaty prepared by the Ministry of Finance. Starting next year, municipalities will be given wider opportunities to borrow when implementing projects financed by the European Union, thus strengthening the financial independence of municipalities.
"With the start of a new EU investment perspective, municipalities will have the opportunity to borrow more flexibly for the implementation of important investment projects. Having in mind the remaining uncertainty and slowing economic growth, efficient and continuous implementation of investments is one of the drivers for stimulating economic growth. The regulatory changes adopted by the Seimas today will strengthen the financial independence and investment potential of municipalities, while ensuring the sustainability of public finances," noted Minister of Finance Gintarė Skaistė.
The draft law prepared by the Ministry of Finance adopted by the Seimas expands the possibilities of municipalities to independently implement investment projects co-financed by the EU and other international assistance funds. At the beginning of a new period of implementation of EU investments, such an opportunity will give municipalities an additional impetus to implement the necessary projects. At the same time, it is possible to accumulate funds for more significant investment projects in a few years, i.e. greater opportunities for multi-year budget planning will be available.
It should be noted that the approved draft law, after consideration in the Seimas, also includes the essential elements of the proposal made by the President of the Republic of Lithuania to adjust the same law.
At the same time, the draft law envisages calculating debt and guarantee limits not only on the personal income tax revenue, but on all independent municipal income. Debt and guarantee limits are not changed, but are transferred from the annual budget indicators law to the constitutional law.
It is also planned to abandon the excessive regulation of municipal fiscal discipline due to the limitation of short-term debts, at the same time foreseeing the need to correct the resulting violations of fiscal discipline by compensating for the deviation from the balance within the next two years.
108 members of the Seimas voted in favour of these changes, 0 voted against, 2 members of the Seimas abstained.
Last updated: 13-02-2023
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