2024-10-10
Auditor General: any new idea to cover long-term liabilities at the expense of debt must be seriously considered
- Pervasisve material misstatements remain in the national set of annual accounts.
- The data on public debt provided alongside with the national accounts are correct in all material respects.
- Reserves were supplemented by EUR 799.7 million in 2023, the amount of reserves to be accumulated by Lithuania has not been determined.
The National Audit Office conducted an audit of the 2023 National Accounts and issued a qualified opinion. This means that the set of accounts gives a true and fair view of the financial position, performance, changes in net assets and cash flows of the public sector as a whole, but material errors were identified.
The errors were caused by misstatements in the financial statements of public sector entities at the lower level of consolidation, i.e. the state and municipalities. The National Audit Office presented its opinions on all the main sets of public accounts in May which are available at https://www.valstybeskontrole.lt/LT/Post/17851.
The national accounts are accompanied by information on public debt. The data on public debt are correct in all material respects.
General government debt stood at EUR 27.6 billion at the end of 2023, rising by EUR 1.9 billion or 7.3% in 2023. The debt-to-GDP ratio increased by 0.2% p.p. and stood at 38.3% of GDP at the end of 2023, with debt management costs on behalf of the government amounting to over EUR 270 million.
State reserves (the Reserve (Stabilisation) Fund, the State Social Insurance Fund and the Compulsory Health Insurance Fund) increased by 27.8% in 2023, accumulating EUR 3.7 billion at the end of the year.
"Any new idea to cover long-term liabilities with debt, especially if no adequate sustainable sources of revenue are foreseen, needs to be seriously considered", says Auditor General Mindaugas Macijauskas.
Although Lithuania has one of the lowest debt levels in the EU and individual fund reserves are increasing, a review of public reserves - the target level, sources of funding, etc. - is needed alongside the strategy for managing government debt. In an uncertain geopolitical and economic situation, the identification and management of the required public reserves is an important element for a country to maintain economic stability, ensure security and effectively manage emerging challenges.
The tool developed by the Ministry of Finance for modelling debt scenarios and assessing the sustainability of government finances is an important step but it is cannot substitute the strategy for public debt management, which sets the direction for the objectives.
Changes in European Union requirements have led to the abandonment of the requirement for Member States to prepare a stability programme, and therefore no medium-term guidelines on government borrowing and debt management were prepared for Lithuania this year. Under the new regulation, Lithuania agreed with the European Commission to prepare national medium-term fiscal plans setting out fiscal, structural and investment policies for the next 4-7 years in spring 2025.