Prime Minister: financing commitments to national defense requires sustainable solutions

“It seems to me, without sustainable sources of funding, to talk about any serious larger commitments in any area is, to be honest, not naive, but simply unfair.” Because there is an attempt to say all the time that we will do everything, but no one will have to pay for it. It doesn’t happen that way,” the Head of the Government told reporters in the Seimas on Tuesday.

This is how she commented on President Gitanas Nausėda’s proposal to provide for the possibility of borrowing for defense in next year’s budget, as no funds are currently planned for creating the division, and the idea of ​​Laurynas Kasčiūnas, chairman of the Seimas National Security and Defense Committee (NSGK), to introduce a defense tax.

“You must have heard the very hot proposal of presidential adviser Kęstutis Budris to the Government to foresee the possibility of borrowing up to 3%, and this view from some experts and some commentators is that everything we can do, we can only do with debt,” said I.Šimonytė .

According to her, despite the fact that now Lithuania’s debt is not very high – 40%. of the gross domestic product (GDP), however, borrowing costs a lot.

“(…) driving at such rates, 50 percent we can achieve faster than the term of the next Government ends”, asserted the head of the Government.

“Some colleagues in the opposition promise that they will allocate 3 percent to national defense. GDP, the president proposes to borrow up to 3 percent. GDP, but the problem is that all this borrowing costs interest. When interest starts to squeeze income in next year’s budgets, know that it is very unfortunate when you see that you need to set aside 150-250 million. EUR to serve the interest on the money already spent, well, you can certainly think of many great things that you would do with that money, if you had it in the budget now, instead of having to pay for something that was already spent a long time ago,” said the Prime Minister.

She agreed that due to the geopolitical situation, national defense funding should only increase.

“If, however, the discussion is about 3 percent. financing, which is also written in the national agreement on defense and security – that now 2.52 percent is financed. GDP, and 3 percent it can be – but it needs sustainable sources of financing, not debt”, emphasized I.Šimonytė.

She said that if the chairman of NSGK wants to start a discussion on defense tax, he can start it.

L. Kasčiūnas, chairman of the National Committee of the Seimas, said that next year he will start gathering support for the introduction of the so-called defense tax, so that it enters into force in 2025. As one of the possible examples of a defense tax, he mentioned the value added tax (VAT), which was increased by two percentage points in Estonia.

The State Defense Council has approved the plan to create a land division in the Lithuanian army by 2030, additional funds are also needed to equip the infrastructure for the German brigade.

The total planned national defense expenses for next year will reach 2 billion. 60 million euros.

According to the data of the Ministry of National Defense, it is planned that the total defense budget in 2024 will reach 2.71 percent. of the gross domestic product, of which 2.52 percent. GDP is budget funds, the rest is the money of temporary bank solidarity contribution.