Management of Public Debt

In the end of 2006 public debt of Lithuania amounted to LTL 14.9 billion; during 2006 it increased by LTL 1662.5 million. Comparing with the GDP indicator, public debt made up 18.2 per cent and was significantly lower than the Mastricht criterion.

Ratio of the government sector debt to GDP decreased in the recent years; in 2006 it totaled 18.2 per cent and was one of the lowest indicators in the European Union countries (after Estonia, Luxemburg, Latvia, and Rumania). However, in the opinion of auditors, public debt should be consistently reduced.

In 2006, as well as in previous years, there was the greatest need for borrowing of funds required for covering the State Budget deficit and public debt. It is forecasted that by 2009 the public debt will decrease up to 17.7 per cent of GDP.

The auditors made an observation that the Indicators Targeted Until 2009 of Medium-Term Borrowing Policy of the State laid in the Description of the Medium-Term Borrowing Policy of the State approved by the Governmet Resolution in 2005 could be more specific.

Recommendation was given to the Government to improve Medium-Term Debt Management Strategy of the State and to consider a possibility to entrench a provision in legal acts stipulating that having reached a non-deficit or surplus budget, the State Budget revenue exceeding the plan will be allocated to reduction of public debt.

The auditors stated that the Ministry of Finance properly manages the key risks of public debt. However, it is stressed in the audit report that management of monetary resources of the State and forecasting of the need for borrowed funds performed by the Ministry of Finance should be improved. The auditors also pointed out that the Ministry of Finance did not use all the possibilities to invest temporarily free monetary resources of the State.

Recommendation was given to the Ministry of Finance to approve procedure for management of the monetary resources of the State and to speed up investment of the temporarily free monetary resources of the State.