The Lithuanian government on November 16 adjusted next year’s draft budget to allow raising defence spending to 3% of GDP through borrowed funds, provided that the overall budget deficit in 2023 did not exceed 4.9% of GDP.
This would allow the government “to borrow between the level of 2.5% of GDP and 3% of GDP so as to prepare more quickly for hosting allied forces in Lithuania”, Finance Minister Gintare Skaiste told the Cabinet.
She said that this was in line with the proposals of President Gitanas Nauseda and the parliamentary National Security and Defence Committee.
The government also plans to strengthen the military mobility package, with an additional 24.8 million euros to be allocated for the Rudninkai training area and other infrastructure measures, and 5 million euros for intelligence capabilities.
Skaiste told the Cabinet that an additional 16 million euros would be needed next year for covering heating subsidies for eligible households. However, the estimated cost of subsidising households’ gas and electricity bills had been revised down by around 98 million euros.
The Cabinet allocated an additional 27.6 million euros for supplements to low pensions.
According to Skaiste, the draft budget has been adjusted to reflect updated forecasts for energy price developments, and certain amendments already adopted by the parliament, such as VAT relief for electric cars owned by companies.
The 2023 budget deficit target remains unchanged at 4.9%, but the revenue estimate is reduced by 20.4 million euros, according to the minister.
As in the original draft, the adjusted budget bill calls for extending VAT breaks for hotels, cultural events and e-books, and keeping the reduced 9% VAT rate for catering, and sports and performers in place in the first half of 2023.
Government budget revenue from VAT would decline by 18.3 million euros in total. (LRT/Business World Magazine)