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Navigating Minefields and Headwinds: National Security, Demographic Shifts, Climate Change and Fiscal Policy in Lithuania
Author:
Serhan Cevik
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https://orcid.org/0000-0002-2373-2023
Series:
IMF Working Papers
Volume/Issue:
Volume 2024: Issue 201
Language:
English
Publication Date:
20 Sep 2024
DOI:
https://doi.org/10.5089/9798400289842.001
ISBN:
9798400289842
ISSN:
1018-5941
Pages:
22
Keywords:
Military spending; interest rates; climate change; demographics; pension; healthcare; tax policy; fiscal sustainability; Lithuania; debt sustainability concern; dependency ratio; headwinds national security; spending pressure; old-age dependency ratio; Aging; Pension spending; Global; Europe
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Lithuania’s immediate fiscal challenges are national security and higher costs of borrowing, but fiscal prospects are further exacerbated by long-term pressures stemming from climate change and a shrinking and aging population. The country has experienced a rapidly decreasing population—from 3.7 million in 1991 to 2.8 million in 2023—and its old-age dependency ratio is consequently expected to increase from 33 percent in 2023 to 53.4 percent by 2050. The resulting long-term spending pressures are projected to amount to as much as 11.2 percent of GDP, which is about 30 percent of the current level of spending. Debt sustainability concerns would not allow financing additional spending with more debt. Hence, a comprehensive strategy will help address these long-term fiscal challenges, including tax policy changes to raise additional revenue while primarily reducing expenditure needs through pension and healthcare reforms.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund