Lithuanian public finances face a severe test as the general government deficit is projected to approach 6 percent of gross domestic product by 2029, driven by climbing defense needs and existing spending commitments. The independent fiscal institution released an evaluation on November 6, stating that the state budget draft violates both national and European Union fiscal discipline rules.
State Control Projects 2027 Deficit
Under the government budget project submitted to Parliament, the general government deficit for 2027 is slated at 3.8 percent of GDP, or 4.8 percent when excluding the European allowance for defense expenditures. However, the State Control projects that the 2027 deficit could reach 5 percent of GDP, with auditors further forecasting that the deficit will touch 5.8 percent in 2028 and 5.9 percent in 2029.
State Control’s fiscal monitoring center head, Jurga Rukšėnaitė, noted that projections show greater pressure on public finances than anticipated in the budget draft. As reported by Vakarų ekspresas, part of the state’s financial obligations are already active without sufficient representation in future budgets.
Auditors emphasize that the draft budget omits certain anticipated expenses, such as support for Ukraine and railway infrastructure, while relying on uncertain revenues like 197 million euros from improved tax administration. State Control head Irena Segalovičienė stated on the ELTA Kampas programme that the government must either adjust the budget or provide a detailed reduction plan backed by concrete measures rather than relying solely on defense funding arguments. State Control pointed out that the 2027–2029 budget plan fails to fully evaluate previously assumed state commitments tied to pensions, wages, railway infrastructure, and support for Ukraine.
Public Debt Climbs Toward Threshold
Beyond the deficit, public debt is projected to climb toward the 60 percent of GDP threshold by 2029, potentially exceeding it in 2030 in alignment with Maastricht criteria limits. This acceleration directly impacts debt servicing expenses.
Finance Minister Taurimas Valys acknowledged that the deficit growth stems from mandatory commitments and urgent defense strengthening. Automatic spending increases from prior legislation—such as pension indexation and collective bargaining wage agreements—drive the expenditure upward, as detailed by 15Min.
Meanwhile, LRT reported Social Democrat Rasa Budbergytė praising the fiscal institution for its independence and courage, saying the conclusion should prompt the Government and Parliament to seek ways to better balance the budget — not only by increasing revenues but also by reducing expenditures. Politician Virginijus Sinkevičius asserted that the findings confirm the necessity of seeking long-term solutions for state budget sustainability, noting that closing the VAT gap toward the European Union average could generate additional revenue.
Central Bank Warns of Procedure
The growing fiscal gap has also drawn intervention from the central bank. Speaking at a meeting of the Economic and Innovation Committee, Alfa reported that Lietuvos Bankas economic department economist Vaidotas Tuzikas stated the institution makes a preliminary assessment that an excessive deficit procedure will likely be initiated against Lithuania in 2027. Such a step would elevate borrowing costs, increase interest rates, and accelerate debt accumulation.
To bring the 2029 deficit back down to the 3 percent limit, the government would need to improve its financial balance by more than 3 billion euros. State Control emphasizes that achieving this requires broadening the tax base, reviewing tax exemptions, and securing sustainable revenue streams rather than relying entirely on efficiency gains.
