IMF Backs Lithuania Fiscal Shift From Austerity Focus

The International Monetary Fund expressed support for the new Lithuanian government’s shift from spending cuts to boosting revenue and backed the Baltic nation’s plans to continue narrowing its budget deficit.

“Lithuania has the lowest revenue-to-GDP ratio in the European Union, and there’s a lot of scope to shift the adjustment more to the revenue side,” Julie Kozack, the head of an IMF mission, told reporters today in the capital, Vilnius.

Prime Minister Algirdas Butkevicius took office in December after his Social Democrat party won elections on pledges to end fiscal-austerity policies that reduced the country’s deficit to 3 percent of gross domestic product last year from 9.4 percent of GDP in 2009. There were better ways to continue fiscal discipline, he said at the time, promising to reduce this year’s gap to 2.5 percent of GDP.

Plans to boost revenue center on promoting investments to stimulate growth and fighting tax evasion in the form of smuggling and illegal wage payments, Butkevicius said today at the same news conference.

“It’s very important for Lithuania to continue to rebuild its fiscal buffer,” said Kozack, a deputy division chief at the IMF’s Europe Department.

To contact the reporter on this story: Bryan Bradley in Vilnius at bbradley13@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net