In its staff concluding statement for the 2026 Article IV mission to Lithuania, the International Monetary Fund said the economy has maintained solid growth, but much of the near-term support comes from temporary demand drivers including Pillar II pension withdrawals, EU-funded investment and expansionary fiscal policy, which are also adding to inflation pressures. IMF staff projects growth of 2.9 percent in 2026 and average inflation of 5.2 percent, and said policy should shift to a tighter fiscal stance in 2026 and a credible medium-term strategy to preserve fiscal buffers and sustain growth. Risks are tilted toward weaker growth and higher inflation, notably from geopolitical tensions, energy prices and stronger domestic demand. Fiscal policy remained expansionary in 2025, with the deficit rising to 1.8 percent of GDP from 1.3 percent in 2024 and public debt increasing to just under 40 percent of GDP. Under the baseline, debt would rise by around 15 percentage points to 55 percent of GDP by 2030 as defense, social and aging-related spending increase. The statement recommends saving any revenue overperformance, limiting energy support to targeted and temporary lump-sum measures, and relying mainly on permanent revenue measures such as broader and higher property taxation, personal income tax reform, fewer inefficient exemptions and better value added tax compliance, alongside selective spending reprioritization and stronger fiscal council independence. It also describes the financial system as sound but says macroprudential policy should be ready to tighten if credit growth and house prices accelerate further, while longer-term growth will depend on labor market reforms, deeper capital markets, better access to finance, faster technology adoption and greater energy resilience. Based on these preliminary findings, IMF staff will prepare a report for discussion and decision by the Executive Board, subject to management approval.
International Monetary Fund2026-05-26
International Monetary Fund urges Lithuania to tighten fiscal policy in 2026 and adopt revenue-led reforms as debt could reach 55 percent of GDP by 2030
The International Monetary Fund’s 2026 Article IV staff concluding statement on Lithuania notes that current solid growth is driven by temporary demand factors that are adding to inflation pressures and recommends a tighter fiscal stance from 2026 and a credible medium-term strategy to preserve buffers. It projects 2.9 percent growth and 5.2 percent average inflation in 2026, warns of risks of weaker growth and higher inflation, and advises permanent revenue measures, targeted energy support, selective spending reprioritization and stronger fiscal council independence to contain rising debt. The statement finds the financial system sound but calls for readiness to tighten macroprudential policy if credit and house price growth accelerate, and highlights structural reforms in labour and capital markets, technology and energy resilience as key to longer-term growth.