Finance Minister Doesn't Rule Out State Debt Growth Next Year Due to Defense Needs

Lithuania's state debt may rise next year as the government considers increasing defense spending, according to Finance Minister Taurimas Valys. While formulating the upcoming budget, the administration aims for balanced growth in state debt. However, Valys acknowledged the possibility of a higher debt-to-GDP ratio to ensure adequate funding for national security and defense.

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we will certainly not approach the maximum 60 percent (of GDP limit) at best, it will reach close to 49 percent, our goal is to maintain this forecast.

This potential increase in debt is partly driven by Lithuania's commitment to supporting Ukraine and contributing to peace processes. Valys stated that the government would not rule out increasing the debt ratio if the need to maintain security and defense financing is significant. He also noted the substantial attention given to financing Ukraine.

Despite the potential increase, Valys assured that the debt-to-GDP ratio would not exceed 49%, a figure well below the European Union's 60% threshold set by the Maastricht criteria. He emphasized that maintaining sustainable finances is crucial for Lithuania's high credit rating, which allows the country to access capital markets under favorable and cheaper conditions.

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But, without a doubt, if we see the necessity that the need to maintain our security and defense financing is sufficiently large, the desire to contribute to peace processes in Ukraine, to maintain attention to Ukraine's financing (...) is also significant, then we certainly do not refuse to move towards the maximum (debt) ratio.

Currently, Lithuania's budget deficit stands at 2.8% of GDP, with government debt at 45.4% of GDP. State Controller data suggests that the government debt could grow to 55.3% of GDP between 2026 and 2029, with interest payments rising to €1.8 billion. Valys reiterated that while the current debt level is manageable, balancing public spending decisions will be key to maintaining economic growth momentum.

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Sustainable finances ensure us a high rating, which allows us to access capital markets under better conditions and cheaper, so we will certainly balance this.