For the fifth consecutive year, Lithuania’s new budget, now for 2019, is described as «record» due to the size of surplus and the hefty allocations to education, health care, innovations and reduction of social inequality.
Finance Minister Vilius Šapoka touts it for being oriented to «strategic goals» of the state, whereas the opposition suspects that behind the generosity stands the coming elections to municipal Councils, the European Parliament and President’s Office, all due in the spring.
«The budget is likely to be approved by the ruling majority, however the draft raises many questions to many. It seems to me it is part of the ruling Farmers and Greens’ vehement self-advertising campaign, yet it little addresses the reality. The growth of salaries in many sectors is based on redistribution of the resources, that’s how it is,»Linas Balsys, a MP from the Lithuanian Parliament opposition, told BNN.
«It is ambiguous to speak about raise of cultural workers’ salaries after the Finance Ministry sent letters to many cultural organizations exhorting them to cut their expenses by 15 per cent,» reminded. «The ruling majority muddles through a «foxy» budget», he added.
According to the budget draft, the state budget’s revenue is set to rise 19.7 per cent, or 1.516 billion euros, to 10.587 billion euros, and expenditure will increase 22.2 per cent, or 2.121 billion euros, to 11.681 billion euros. The state budget’s deficit will stand at 1.095 billion euros, up 2.2 times, or 605.369 million euros, from this year’s planned deficit of 489.171 million euros.
The government’s total tax revenue is expected to grow by 30.1 per cent next year compared with this year to 8.019 billion euros. The value-added tax (VAT), the largest single source of tax revenue, should increase by 8.8 per cent to 3.85 billion euros.
To translate the numbers into the real-life picture, the minimum wage should go up by 30 euros to 430 euros and the average pension by nearly as much in 2019, child benefit, introduced in 2017, will increase from 30 euros to 50 euros per child under 18. The latter measure will require an additional 120 million euro from the budget and the indexing of pensions – another 220 million euro.
The financing of health sector is set to increase by 280 million euros, education sector will be allocated 185 million more, year-on-year, with the bulk of money to be used for salaries of teachers and scholars.
When summing up the budget, Lithuanian Prime Minister Saulius Skvernelis, called it «socially responsible» and said it will help «improve the quality of life» for a large part of the population.
«Importantly, the budget provides for the structural reforms approved by the government and the Seimas. These are education, social protection, health and innovation reforms and other important things aimed at achieving an improvement in the quality of life and income growth for our people. This is a socially responsible budget,» he emphasised.
The fast rise in budget revenue and expenditure is related to the planned tax overhaul (the consolidation of taxes on the employee’s side), as well as the transfer of the funding of the general part of the social insurance pension to the state budget, he insisted.
Differently from this year’s national budget ,which focuses on the lowest-income people, next year’s budget is oriented toward broader population groups, the PM noted.
«Quite a large amount of money, more than 600 million euros, is allocated for working population, including each of us. We focused on people on the lowest income in this year’s budget, but (next year’s budget) covers the so-called middle class as well,» said Skvernelis, who is expected to run in the presidential election under the flag of the ruling Farmers and Greens next year.
«In addition, we’ll form a reserve of more than a billion euros and we’ll have it in place as early as next year in case, God forbid, a crisis should occur someday. We’ll have a surplus budget and we’ll strictly adhere to financial discipline,» he said.
The Government head says that taxes for the employed will be reduced by 6 per cent over the next three years, a result of the tax overhaul.
«Our aim is to create and maintain 26,000 new jobs and spread the word about Lithuania as the Baltics’ most competitive country in terms of labour taxes,» Skvernelis underscored.
Although Finance Minister Vilius Šapoka estimates that the country’s budget surplus will stand at 0.6 per cent GDP next year, the exact numbers can be adjusted in the fall. The Minister also pointed out that the Cabinet «took into account» and «reflected» the ongoing international developments in finance markets when drawing up the budget.
«We have to acknowledge that the growth of world economy is slowing down and the growth is not stable and even any longer. And the Lithuanian economy is not an exception from the whole picture. Although we aim at a record-large new budget, we are accumulating throughout monetary reserves. The 2008 crisis has taught us a valuable lesson,» Šapoka said.
According to him, Lithuania aims to accrue 1,5 billion euros in reserves by the end of the next year.
Disagreeing with the Minister claiming that the new budget is a reflection of «structural and strategic reforms» being carried out by the Government, Ingrida Šimonytė, a Conservative MP and former Finance Minister in the 2008-2012 Conservatives-led Cabinet, lambasted Šapoka and claimed she «cannot» remember «a single reform»carried out by the Government.
«I really do not recall any. Perhaps the minister refers to the overhaul of teachers pay, which is merely dragging of the blanket from one teachers to others. We call it redistribution of resources, to employ the economic terms,» Šimonytė said.
«And I do not also understand why, for example, the indexing of pensions the Cabinet is also called «a reform». The laws envision indexing, so what are we here talking about?»the former Finance Minister wondered.
Justas Mundeikis, economist and lecturer at Vilnius University, also questions how the Cabinet is going to meet the budget targets.
«From what I see, two sources are foreseen for that. The first is from the growth of economy and the other is from the reducing of the shadow economy. Indeed, we can plan growing of the economy, not reduction of shadow economy,» he told BNN. «Thence a big risk that we can stumble upon the road and fail to collect the budget as we wish,» he added.
Although the Cabinet said it didn’t mull any new taxes in the new year, however there are rumours that the position may change with a gap in the budget.
Introducing higher tax for strong ale, a new tax for car owners and real estate owners has been among the raised ideas on the Lithuanian Parliament (Seimas) floor this year.