Annual Report on Exchange Arrangements and Exchange Restrictions 2005
Chapter

LITHUANIA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of May 31, 2005)

Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: May 3, 1994.
Exchange Arrangement
CurrencyThe currency of Lithuania is the Lithuanian litas.
Exchange rate structureUnitary.
Classification
Currency board arrangementThe litas is pegged to the euro at the rate of LTL 3.4528 per €1. On June 27, 2004, Lithuania adopted the ERM II. However, the authorities still maintain the currency board arrangement without modification.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketAny natural or juridical person may enter into a forward exchange contract with a bank operating in Lithuania or in a foreign country without limitation.
Arrangements for Payments and Receipts
Prescription of currency requirementsThe payment system, payment instruments, and the relationship among the participants of the payment system in Lithuania are governed by the Law on Payments.
Use of foreign exchange among residentsThe euro may be used for domestic cash and noncash payments and settlements, and foreign exchange may be used for all noncash domestic settlements, provided that the parties involved agree thereto.
Payments arrangements
Bilateral payments arrangements
OperativeAn agreement between the Bank of Lithuania (BOL) and the National Bank of Belarus prescribes the procedures for settlements between legal entities.
Regional arrangementsEffective May 1, 2004, Lithuania became a member state of the EU.
Administration of controlParliament has the legislative authority in foreign exchange and trade matters. A banking law has delegated to the BOL the authority to issue regulations governing foreign exchange transactions. All foreign exchange transactions involving domestic currency must be effected through authorized credit institutions licensed by the BOL. Authorized banks are allowed to transact among themselves, as well as with residents and nonresidents; the BOL may limit on a case-by-case basis the types of transactions that may be conducted.
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)On May 4, 2005, Lithuania notified the IMF that certain exchange restrictions are imposed in accordance with the relevant UN Security Council resolutions and the EU regulations.
In accordance with UN sanctionsIn accordance with UN resolutions, sanctions are imposed against individuals, groups, and organizations associated with terrorism.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)No.
Controls on exports and imports of banknotesEffective May 1, 2004, customs must (1) register imports or exports of domestic or foreign cash exceeding LTL 10,000 or its equivalent and (2) report to the Financial Crime Investigation Service imports or exports of cash in excess of LTL 50,000 a transaction.
On exports
Domestic currencyYes.
Foreign currencyYes.
On imports
Domestic currencyYes.
Foreign currencyYes.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadNatural and juridical persons must report the opening and closing of these accounts to the tax authorities.
Accounts in domestic currency held abroadn.r.
Accounts in domestic currency convertible into foreign currencyn.r.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Approval requiredApproval is necessary if required by legislation of the other country.
Domestic currency accountsYes.
Convertible into foreign currencyThere is no distinction between resident and nonresident accounts in this regard.
Blocked accountsCertain accounts are blocked by government resolutions in accordance with UN Security Council resolutions.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measuresThere are no quantitative restrictions or licensing requirements on imports, except for health and national security reasons, and as noted below. Certain food products, such as semiprocessed meat products, poultry, and fish, are subject to licensing.
Other nontariff measuresCertain agricultural goods and alcoholic beverages are subject to duties, and certain quantitative restrictions are used to protect Lithuania’s cultural heritage. Alcoholic beverages and tobacco, for which the licensing requirement was eliminated on January 1, 2004, may be imported only by traders registered with the government, but import quantities are unrestricted. There are licensing requirements governing trade in strategic goods and technology and certain oil products.
Import taxes and/or tariffsEffective May 1, 2004, the EU Common Customs Tariff applies. Previously, a three-tier tariff structure existed, consisting of (1) a “conventional” rate applied to countries granted MFN status, (2) a “preferential” rate applied to countries with which Lithuania had a foreign trade agreement, and (3) an “autonomous” rate that was usually 5% higher than the MFN rate and was applied to all other countries. Imports entering under a majority of tariff lines were duty free; and most other tariff lines carried duty rates of 20% or less; however, rates on agricultural products ranged as high as 87%. Some non–ad valorem duty rates had remained in effect. A VAT of 18% applies to certain products, whether imported or domestic, as follows: ethyl alcohol and alcoholic beverages, manufactured tobacco, energy products, electricity, coal, coke, and lignite.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsNo.
Export licensesThere are licensing requirements governing trade in strategic goods. There are also licensing requirements governing exports of certain oil products, but without quotas.
Without quotasYes.
With quotasYes.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsYes.
Controls on capital and money market instrumentsNo.
Controls on derivatives and other instrumentsNo.
Controls on credit operationsNo.
Controls on direct investmentYes.
Inward direct investmentForeign investments in the following areas are prohibited: (1) national security and defense, except for investments by foreign entities that meet the criteria for European and transatlantic integration, provided that they are approved by the State Defense Council; and (2) the organization of lotteries.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase locally by nonresidentsForeign enterprises and individuals are allowed to acquire agricultural and nonagricultural land, subject to provisions in the constitution.
Controls on personal capital transactions
Loans
By residents to nonresidentsThese transactions must be registered with the BOL.
To residents from nonresidentsForeign loans received by enterprises and credit institutions must be registered with the BOL.
Provisions specific to commercial banks and other credit institutions
Borrowing abroadThese transactions must be registered with the BOL.
Lending to nonresidents (financial or commercial credits)These transactions must be registered with the BOL.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsForeign exchange liabilities are subject to reserve requirements, which must be held in dollars and/or euros in a special account at the BOL. The choice of currency or currencies is left to the bank’s discretion.
Open foreign exchange position limitsBanks’ overall open positions may not exceed 25% of their capital, and the open position in individual currencies may not exceed 15% of a bank’s capital.
On resident assets and liabilitiesYes.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investors
Limits (max.) on investment portfolio held abroadInvestment companies may invest only in “liquid” EEA and OECD securities, as defined by the Lithuanian Securities Commission. Effective January 1, 2004, the Law on Insurance authorizes the Insurance Supervisory Commission (ISC) to supervise insurance activity in Lithuania. Previously, supervision was conducted by the State Insurance Supervisory Commission under the MOF. Effective April 1, 2004, insurance undertakings may cover technical provisions only by assets localized in Lithuania, an EU member state (this also applies to EEA countries), or an OECD member state. Insurance companies intending to cover technical provisions with assets localized in other countries are required to apply for approval to the ISC indicating their reasons. An ISC approval sets forth the applicable conditions.
Currency-matching regulations on assets/liabilities compositionInsurance technical provision funds must be, with some exceptions, invested in assets expressed in the currency in which the insurance company’s commitments are due, as established in the insurance or reinsurance contracts. Effective April 1, 2004, if commitments by an insurer are required to be covered with assets expressed in the currency of the EU member state, this requirement is considered satisfied when the assets are expressed in euro.
Other controls imposed by securities lawsNo.
Changes During 2004
Exchange arrangementJune 27. Lithuania adopted the ERM II but the authorities continued to maintain the currency board arrangement without modification.
Arrangements for payments and receiptsMay 1. Lithuania became a member state of the EU.
May 1. Customs was required to register exports or imports of domestic or foreign cash in excess of LTL 10,000 and to report to the Financial Crime Investigation Service exports or imports of cash in excess of LTL 50,000 a transaction.
Imports and import paymentsJanuary 1. The licensing requirement for imports of alcoholic beverages and tobacco was lifted.
May 1. The EU Common Customs Tariff began to apply.
Capital transactions
Provisions specific to institutional investorsJanuary 1. The Law on Insurance authorized the ISC to supervise insurance activities in Lithuania.
April 1. Insurance companies were allowed to cover technical provisions only by assets localized in Lithuania, an EU member state (this also applied to EEA countries), or an OECD member state. To cover technical provisions with assets localized in other countries, ISC approval was required.
April 1. The requirement that the insurer had to be covered by assets expressed in the currency of a member state of the EU was considered to be satisfied when the assets are denominated in euro.
Changes During 2005
Arrangements for payments and receiptsMay 4. The authorities notified the IMF of certain exchange restrictions imposed in accordance with relevant UN Security Council resolutions and EU regulations.

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