Following suggestions by economic analysts that the government should approach the International Monetary Fund (IMF), a number of high-ranking politicians have made contradictory statements about whether a loan is on the table.
The prime minister's financial advisor, however, told The Baltic Times that they would not approach the IMF at this time. Lithuanian Prime Minister Andrius Kubilius said on March 26 that approaching the IMF is not an option.
"We are not afraid of borrowing from the IMF, but we know the fund's rules and its lending principles and terms. Even though the IMF is reviewing its policy, the fund continues to lend money only as a last resort measure and always wants to know if the government has done everything and has exhausted all possibilities to balance its finances on its own," Kubilius told Ziniu Radijas.
Kubilius said an IMF loan would sharply limit the state's spending, causing it to slash budgets further.
"If one imagines that the IMF's loan would ease our life in some way and would allow us not to cut spending, or would allow us to spend money on some investments very easily, this is not exactly what would happen," he said referring to the conditions of the loan that would strictly control the actions of the state.
Algirdas Semeta, the country's finance minister who was also finance minister during the Russian financial crisis, told the Financial Times that Lithuania may still have to get an IMF loan.
"In the current crisis we are able to implement these [austerity] measures ourselves but we don't reject the idea that we will have to seek international finance assistance and we are very carefully analyzing the situation," Semeta said.
Mykolas Majauskas, Kubilius' financial advisor, told The Baltic Times that nothing could be ruled out in the current situation, but that the government is doing everything by the book.
"It's hard to decide on what actions to take 's the environment is fluid, not even dynamic, but fluid."
"In the current environment, no country can rule it out," he said.
Semeta said it's hard to make concrete statements on the issue in the current crisis.
"We are on a permanent revision of our budget. The economy is deteriorating so fast that even the conservative projections made in December now look optimistic and that is why we are taking urgent measures to maintain macro-economic stability," he said.
SEB Bankas' economic analyst Gitanas Nauseda first raised the issue, saying that "enough is enough," and that the IMF should be readied.
"Despite the efforts of the government to achieve the planned fiscal deficit, it didn't happen and we have problems with collecting revenues 's the budget deficit is going up and will continue [and] the recession is deeper than before," the analyst told TBT.
"It's unlikely that cutting other expenditures will fix the problem and it will just make the recession deeper 's it will result in a vicious cycle 's we should say enough is enough 's we should go to IMF for financial support and show them our efforts were right, but they weren't enough," he added.
Majauskas hit back saying the government knows what it is doing.
"The government has to decide, it isn't 'Nauseda says and the government does.' We are taking all measures to ensure prudence and financial stability. We are financing expenditures as we should be. As the new predictions show that GDP will contract more than before, we are reducing more expenditures," he said.
The Finance Ministry is expecting the country's GDP to contract by 10.5 percent.
