the financial markets can punish Lithuania for the growing debt – you shouldn’t lose your hair
“Financial markets now react very sensitively to the spending of at least any Government. For a budget deficit exceeding 5%. gross domestic product, financial markets could punish by limiting Lithuania’s borrowing opportunities and raising the cost of borrowing,” N. Mačiulis told the ELTA news agency.
In practice, there is no doubt that the Central Bank (ECB) will also increase the base rates in two more scheduled European meetings, so the economist does not rule out that approximately 3.5 percent. the country’s target cost of borrowing may rise up to 4%. or even more.
“The budget deficit will probably have to increase in more than one EU country, but one should not get carried away with the hair accent and imagine when it can splash left and right,” he said.
The expert emphasizes that, in an uncertain environment, financial market participants highly value the plans of all Governments to further increase the budget deficit. Therefore, according to him, if Lithuania decides to borrow additional significant sums of money, the country’s borrowing capabilities can be understood.
“We welcome very good examples. Let’s look at Italy, the United Kingdom: the cost of borrowing increased by more than 1 percent in a week. point simply because the new government says that we will reduce taxes, increase expenses, and the budget deficit is not a problem”, asserted N. Mačiulis.
ELTA reminds that in this year’s improved draft of the state budget approved by the Government, it is estimated that the deficit of the government sector in 2022 will amount to -4.9 percent. GDP.
The Minister of Finance has previously stated that in 2023 budget spending really big pajamas. Although the Ministry of Finance will present the specific deficit together with next year’s state financial plan, the minister assures that it should reach about 3-4 percent. from GDP. At the same time, she does not rule out that the state can borrow “several billion” euros.
The Ministry of Finance plans that this year’s debt management expenses amount to 290.5 million. EUR, of which 261.4 million EUR value for loans taken on behalf of the state and issued Government securities.
The weighted average commitment rate of new loans assumed since the beginning of the year is 1.6 percent. It is predicted that in 2022 the average weighted rate of assumed new debt obligations will be around 2.3 – 2.6 percent, because currently the 3-year the yields of government securities increased to 3.5%.