The Republic of Lithuania: Staff Report for the 2011 Article IV Consultation—Informational Annex

The 2011 Article IV Consultation reports that the economy in the Republic of Lithuania has staged an impressive recovery based on a supportive global environment and determined policy adjustment. The main driver of the recovery was export growth. Executive Directors commended the authorities for Lithuania’s impressive economic recovery, noting in particular the sizable fiscal consolidation and the maintenance of confidence in the banking system. Directors also supported the authorities’ goal of reducing further the fiscal deficit, thereby putting government debt on a downward path.

Abstract

The 2011 Article IV Consultation reports that the economy in the Republic of Lithuania has staged an impressive recovery based on a supportive global environment and determined policy adjustment. The main driver of the recovery was export growth. Executive Directors commended the authorities for Lithuania’s impressive economic recovery, noting in particular the sizable fiscal consolidation and the maintenance of confidence in the banking system. Directors also supported the authorities’ goal of reducing further the fiscal deficit, thereby putting government debt on a downward path.

FUND RELATIONS

(As of September 30, 2011)

Membership Status

Joined: April 29, 1992; Article VIII

General Resources Account

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SDR Department

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Outstanding Purchases and Loans

None

Latest Financial Arrangements

In millions of SDR, (mm/dd/yyyy)

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Projected Payments to Fund

None

Implementation of HIPC Initiative:

Not applicable

Implementation of MDRI Assistance:

Not applicable

Current Status of Safeguards Assessments:

Under the Fund’s safeguards assessment policy, the Bank of Lithuania (BOL) was subject to and completed a safeguards assessment with respect to the Stand-By Arrangement, (the SBA was approved on August 30, 2001 and expired on March 29, 2003) on December 10, 2001. The assessment identified certain weaknesses and proposed appropriate recommendations as reported in EBS/01/211. The BOL has implemented these recommendations.

Exchange Arrangements:

The currency of Lithuania is the litas. From April 1, 1994 to February 1, 2002, the litas was pegged to the U.S. dollar at LTL 4 per U.S. dollar under a currency board arrangement. Since February 2, 2002 the litas has been pegged to the euro at LTL 3.4528 per euro. Lithuania joined the European Union (EU) on May 1, 2004, and ERM II on June 28, 2004. Lithuania has accepted the obligations of Article VIII of the Fund’s Articles of Agreement and maintains an exchange system free of restrictions on the making of payment and transfers for current international transactions except for those maintained solely for the preservation of national or international security and which have been notified to the Fund pursuant to Executive Board Decision No. 144-(52/51).

Article IV Consultation:

Lithuania is on the 12-month consultation cycle. The last Article IV consultation was concluded on July 08, 2010. The Executive Board assessment is available at http://www.imf.org/external/np/sec/pn/2010/pn1080.htm and the staff report and other mission documents at http://www.imf.org/external/pubs/cat/longres.aspx?sk=24026.0

FSAP Participation and ROSCs:

An FSAP Update mission was completed on November 19, 2007. Fiscal and statistics ROSCs were completed in November 2002 and December 2002, respectively.

Technical Assistance:

The table on the following page summarizes the technical assistance missions provided by the Fund to Lithuania since 1999.

Resident Representative: Mark Allen (stationed in Warsaw, Poland).

Anti-money laundering and combating financing of terrorism:

Lithuania’s compliance with the international AML/CFT standard, the Financial Action Task Force’s (FATF) 40+9 Recommendations, was assessed by MONEYVAL, the FATF-style regional body of which it is a member, in January 2006. The ensuing AML/CFT assessment report was adopted by the MONEYVAL Plenary in November of that same year. Since then it has produced two progress reports, the first of which was adopted in March 2008 and the most recent report was adopted in March 2010. At the occasion of Lithuania’s latest progress report the significant steps taken by Lithuania over the past years were acknowledged. At the same time the country indicated that it was still working on amending its Criminal Code to unify its money laundering definitions, to bring this definition in line with the Vienna and Palermo Conventions and to ensure dissuasive criminal sanctions against money laundering. According to the authorities, since the assessment report was adopted better customer due diligence (CDD) measures were introduced, including regarding the identification of shareholders of legal persons, and improvements were made regarding the obligation to transmit suspicious transaction reports (STRs). They also stated progress was made in the areas of implementation of UN instruments and the freezing and confiscation of terrorist assets.

Lithuania: Technical Assistance from the Fund, 1999-2011

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STATISTICAL ISSUES

Over the past several years, Lithuania has made good progress in establishing a macroeconomic database. Official data for all sectors are adequate for surveillance purposes.

Lithuania subscribed to the Special Data Dissemination Standard (SDDS) in May 1996, and its metadata have been posted on the Fund’s Dissemination Standards Bulletin Board (DSBB) since April 1997. Lithuania meets the SDDS specifications for coverage, periodicity and timeliness of the data, and for the dissemination of the advance release calendars. A significant amount of economic and financial information is now available on various websites through the Internet (see section on Dissemination of Statistics, below). A ROSC data module was published in November 2002.

National Accounts

The national accounts are compiled by Statistics Lithuania (SL) (the former Department of Statistics) in accordance with the guidelines of the European System of Accounts 1995 (ESA 95). Quarterly GDP estimates at current and at constant prices are compiled using both the production and expenditure approaches. GDP estimates by production are considered to be more reliable than the corresponding estimates by expenditure, but no statistical discrepancies between these two estimates are shown separately in the published figures as the discrepancies are included in the estimates of changes in inventories. The annual and the quarterly national accounts are compiled at previous year prices and chain-linked to 2000. In general, good data sources and sound methods are used for the compilation of the national accounts, but measuring activity in the current volatile environment is proving very challenging. Moreover, difficulties remain in measuring the economic activity of the informal sector. These estimates are compiled at detailed levels of economic activity using fixed coefficients derived from a benchmark surveys conducted in 1996 and 2003, and updated in 2006. According to the most recent updates, the informal sector was estimated to be 13 percent of GDP in 2008. A new benchmark survey will be released at the end of 2011.

Price Data

Since December 1998, CPI weights have been updated annually. The monthly CPI is available in the second week following the reference month. The producer price index is calculated according to the chain-linked Laspeyres formula with weights updated every year.

Public Finance

Data on the central government budget execution are available at a monthly and quarterly frequency, although these data are subject to frequent revisions. The ongoing treasury project is expected to improve fiscal data quality substantially. However, further work is needed to clarify the treatment of public health care providers and of EU transactions, and the consolidation procedure for government operations. A new classification, incorporating the GFSM2001 was approved in mid-2003. Since then, the MoF has been reporting to STA general government’s annual data on an accrual and cash basis (except for local governments, which are still on a cash basis) for publication in the Government Finance Statistics Yearbook (GFSY). In addition, the MoF has been reporting quarterly and monthly data in the GFSM 2001 format for publication in the IFS.

Monetary and Financial Statistics

The Bank of Lithuania (BoL) reports monetary and financial statistics (MFS) to STA on a timely and regular basis. The scope, concepts and definitions of the MFS are broadly in line with the guidelines of the Monetary and Financial Statistics Manual (MFSM). Following Lithuania’s accession to the European Union, the BoL implemented the ECB framework for compiling and reporting monetary data reflecting the ECB regulations and ESA 95 on sectorization, valuation and classification of financial instruments.

External Sector

The BoL is responsible for compiling balance of payments, international investment position (IIP), external debt and international reserves statistics. The BoL reports quarterly data on balance of payments, IIP and monthly international reserves to STA on a timely and regular basis. Balance of payments data (on a monthly and quarterly basis) are compiled using the format recommended in the Balance of Payments Manual, fifth edition (BPM5). The monthly data correspond to several key balance of payments components, compiled on the basis of a sample survey covering the public sector, commercial banks, and some nonfinancial private sector institutions. The Data Template on International Reserves and Foreign Currency Liquidity is disseminated monthly according to the operational guidelines and is hyperlinked to the Fund’s DSBB. Since late 2004, the BoL disseminates quarterly external debt data in the World Bank’s Quarterly External Debt Statistics (QEDS) database.

Dissemination of Statistics

The authorities publish a range of economic statistics through a number of publications, including the SL’s monthly publication, Economic and Social Developments, and the BoL’s monthly Bulletin. A significant amount of data are available on the Internet:

  • metadata for data categories defined by the Special Data Dissemination Standard are posted on the IMF’s DSBB (http://dsbb.imf.org);

  • the BoL website (http://www.lbank.lt/eng/statistic/index.html) provides data on monetary statistics, treasury bill auction results, balance of payments, IIP, external debt and other main economic indicators;

  • the SL website (http://www.stat.gov.lt) provides monthly and quarterly information on economic and social development indicators;

  • the MoF (http://www.finmin.lt) home page includes data on the national budget, as well as information on laws and privatization; and government finance statistics (deficit, debt).

  • NASDAQ OMX Baltic website (http://www.lt.omxgroupnasdaqomxbaltic.c om./?lang=en) has includes information on stock trading at NASDAQ OMX Baltic stock Exchange in Vilnius (the former Vilnius Stock Exchange).

Lithuania: Table of Common Indicators Required for Surveillance—As of OCTOBER 31, 2011

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Any reserve assets that are pledged of otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Not Available (NA).

Reflects the assessment provided in the data ROSC (published on November 22, 2002, and based on the findings of the respective missions that took place during May 8-22, 2002) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), or not observed (NO).

Reflects the assessment provided in the data ROSC (published on November 22, 2002, and based on the findings of the respective missions that took place during May 8-22, 2002) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning source data, statistical techniques, assessment and validation of source data, assessment and validation of intermediate data and statistical outputs, and revision studies are fully observed (O), largely observed (LO), largely not observed (LNO), or not observed (NO)