Lithuania's 2027 budget sets defence at 5% of GDP, deficit rises to 3.8%

Lithuania's government approved the draft 2027 state budget on Friday morning and will now submit it to the parliament, the Seimas. The Finance Ministry said on Thursday that defence would receive more than 4.8 billion euros, equal to 5% of projected gross domestic product (GDP). The planned general government deficit stands at 3.8% of GDP, above the European Union's Maastricht criterion, which generally caps deficits at 3%.

Defence spending

Compared with this year, defence funding would rise by almost 35 million euros. The sum covers the Defence Ministry and the State Defence Fund, which is set to receive over 896 million euros. This year's spending is lower in money terms, but it makes up a bigger share of the economy: 5.38% of GDP.

Early last year, the State Defence Council, which brings together the country's political leadership and representatives of its national defence system, agreed to devote 5% to 6% of GDP to defence every year from 2026 to 2030. The money is meant to help build an army division and prepare Lithuania to host a German brigade.

Revenue, expenditure and debt

State budget revenue, including EU funds, is expected to reach almost 22.2 billion euros, with expenditure at 27.9 billion euros. Prime Minister Mindaugas Sinkevičius said earlier in an interview that most spending beyond revenue was tied to the 5% defence target and to increases in indexed benefits. General government debt is projected at 48.2% of GDP next year.

The government also proposes pay rises for statutory officers and cultural workers, and has set aside extra funds for a proposed package of measures to encourage families to have children.

Social and health funds

Revenue of Sodra, the state social insurance fund, is projected at nearly 7 billion euros next year, with spending above 5.5 billion euros. The average pension would increase by 10.4% to 825 euros a month, and to 895 euros for people who meet the length-of-service requirements. The budget earmarks 715 million euros for the increases. The Compulsory Health Insurance Fund expects almost 3.3 billion euros in revenue in 2027 and almost 3.2 billion euros in spending.

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