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The Bank of Lithuania took notice of this after submitting the analysis of next year’s draft budget to the Seimas. In it, the bank sees risks in the efficient use of borrowed funds.
The deficit could increase if Lithuania does not receive all the planned funds from the Recovery Fund, on which Europe has not yet agreed. It is stated that Lithuania will incur costs for the implementation of the DNA Plan for the Future Economy, but no funds have been received from the Recovery Fund.
“We believe that there is a need for a critical review of the DNA Plan for the Future Economy, to adjust the need and nature of investments as necessary, and to plan the use of the EU Recovery Fund in a very responsible way.” said the conclusions.
There is also the risk that income from tax deferral refunds will be less than expected.
More will be needed to control the pandemic
According to project calculations, the funds planned for managing the pandemic are significantly lower than the costs incurred in 2020.
For example, in 2021. It is unlikely that health insurance will spend much less than projected in 2020.
According to the Bank of Lithuania, it is very likely that measures to manage the pandemic and its consequences will require higher costs than currently envisaged in projects.
Sigismund Gedvila / 15-minute photo / COVID-19 patients are taken to the Vilnius City Clinical Hospital
The calculations presented in them show that in 2020, about 700 million can be spent. euros. If in 2021, it would require at least half of these funds, the deficit of public administrations would increase by approximately 0.5%. GDP, and if the same amount of funds is needed, 1.2%. GDP (respectively, the deficit would increase to 5.5-6.2% of GDP).
Support is offered automatically
“Given the current pandemic situation, it would be advisable to budget the necessary funds for fiscal measures, which are automatically in force in emergency and / or quarantine regimes, as they are likely to be incurred,” concluded the Bank of Lithuania.
The central bank is convinced that the practice of excluding a significant portion of spending from the budget, as was the case in 2020, should be avoided.
According to the Bank of Lithuania, it is important to establish a well-thought-out system of support and incentives applied during quarantine, allowing residents and businesses to benefit from support when they need it most, and it should be activated “automatically”.
Exceptional help delivery to this Tax measures make it more difficult for companies to plan their activities in the long term, says the Bank of Lithuania.
Danger to the DNA plan
The new government does not hide the fact that the DNA plan can be revised, and the analysis of the Bank of Lithuania will encourage it even more.
The Recovery Fund amounts and grants to be paid to individual countries have not yet been approved at the EU level, but the Lithuanian government is already planning specific expenditures for specific projects.
“There is a risk that the proposed projects of the DNA Plan for the Economy of the Future will not meet the RRF’s evaluation criteria, so the expected amount of funds will not be received,” warns the Bank of Lithuania.
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