Lithuania’s 2027 budget: 5% for defence, growing government deficit

Lithuania’s draft budget for 2027 allocates more than 4.8 billion euros to defence, equivalent to 5% of projected GDP, the Finance Ministry said Thursday.

The proposed allocation would increase defence spending by nearly 35 million euros from this year. It includes funding for the Defence Ministry and the State Defence Fund, which is set to receive more than 896 million euros.

Although defence spending was lower in monetary terms this year, it accounted for a larger share of the economy, at 5.38% of GDP.

Early last year, Lithuania’s State Defence Council, which includes the country’s political leadership and representatives of its national defence system, agreed to allocate 5% to 6% of GDP to defence annually from 2026 through 2030. The increased spending is intended to help develop an army division and prepare Lithuania to host a German brigade.

The Finance Ministry on Thursday registered draft budgets for the state, municipalities and social funds for next year, projecting a general government deficit of 3.8% of GDP.

State budget revenue is expected to reach nearly 22.2 billion euros, including European Union funds, while expenditure is projected at 27.9 billion euros.

The projected deficit exceeds the European Union’s Maastricht criterion, which generally limits government deficits to 3% of GDP. Prime Minister Mindaugas Sinkevičius said in an earlier interview that most spending beyond revenue was linked to the goal of allocating 5% of GDP to defence and to increases in benefits that are indexed.

The government is also proposing pay increases for statutory officers and cultural workers in 2027. Additional funding has been earmarked for a proposed package of measures to encourage families to have children.

Revenue for the Sodra state social insurance fund is projected at nearly 7 billion euros next year, with expenditure expected to exceed 5.5 billion euros.

The average pension is set to rise by 10.4% to 825 euros a month, increasing to 895 euros for people who meet the required length-of-service criteria. The budget allocates 715 million euros for the pension increases.

The Compulsory Health Insurance Fund is expected to collect nearly 3.3 billion euros in revenue in 2027 and spend almost 3.2 billion euros.

General government debt is projected to reach 48.2% of GDP next year.

Sinkevičius said Lithuania would continue to devote one of Europe’s largest shares of GDP to defence.

Finance Minister Taurimas Valys said the budget sought to balance stronger national security with income growth above inflation and the economy’s long-term growth potential.