LITHUANIA

The Republic of Lithuania is a semi-presidential republic, with a President as head of state and a Prime Minister as head of government. The President is elected by direct universal suffrage for a five-year term. The country declared its independence in March 1990 and the Constitution of the Republic of Lithuania came into force in 1992. Legislative power is vested in the Parliament (Seimas), which is composed of 141 members, among which 70 members are elected through an open-list proportional representation system, whereas the remaining 71 members come from individual constituencies. The country became a member of the European Union in May 2004.

Lithuania is a decentralised unitary state, with a single-tier of subnational governments, made up of municipalities. Local government is enshrined in the Constitution whose Chapter X is dedicated to “Local Self-Government and Governance”. Article 119 states that “the right to self-government shall be guaranteed to the administrative territorial units of the State” and Art.120 that “municipalities shall act freely and independently within their competence defined by the Constitution and laws”. More precise provisions are specified in the 1994 Law on Territorial Administrative Units and their Boundaries (LTAUD) and the 1994 Law on Local Self Government (LLSG). The LLSG defines municipal functions and ensures their autonomy. It was amended in 2002 and 2014, which empowered municipalities with more competences.

There is no regional government level in Lithuania. Until 2010, county governor’s administrations acted as deconcentrated entities of central government. In 2010, the post of county governor and the county governor’s administration were abolished, their functions redistributed among the municipalities and the central government. Counties have been remained as administrative units of country’s territory and 10 Regional Development Councils (RDCs), which were created within the counties in 2000, remained an independent collegial body, composed of municipalities’ mayors (from all the municipalities belonging to that particular county), delegates from local councils, and an authorized person appointed from the central government or governmental institution. RDCs also have been considered as a tool for cooperation within and across the regions. The Department of Regional Development of the Ministry of Interior acted as the secretariat of the RDCs. Since 2017, the representatives of social and economic partners, appointed by the Government or an institution authorised by it, were also included in the composition of the RDCs, in which they had to make up at least one third of each RDC. However, until 2020, the administrative capacities and functions of RDCs were limited, mainly concentrated on regional development planning, identification of lagging areas and development programmes for these areas, identification of regional socio-economic development projects and distribution of some part of EU structural funds.

Therefore, in 2020, the parliament adopted an amendment to the law on regional development, making RDCs legal entities and extending the powers of RDCs, relevant to the further creation of self-governing regions. RDCs became as supra-municipal institutions with enhanced prerogatives to implement national regional policy in their territories (they were partially transferred some powers in regional development investment planning from ministries) and to promote inter-municipal cooperation at the regional scale. The body of RDC is composed of the general meeting of participants and the governing bodies, which include the panel (composed of the mayors and members of the municipal councils) and the administrative director of RDC. Their main competences are to represent the region, to plan and coordinate the implementation of the national regional policy in their respective region, to encourage social, economic development of the region, sustainable development of urbanised territories, decrease social and economic disparities within and across regions, as well as disparities among municipalities, and to encourage cooperation among municipalities in order to increase the efficiency of public services provision.

TERRITORIAL ORGANISATION
MUNICIPAL LEVEL	INTERMEDIATE LEVEL	REGIONAL LEVEL	TOTAL NUMBER OF SNGs (2021)
60 municipalities (savivaldbyés)
Average municipal size: 46 583 inh.
60			60

OVERALL DESCRIPTION: Lithuania has a single-tier of local self-government composed of 60 municipalities (savivaldbyés).

MUNICIPAL LEVEL: The number of municipalities results from the mergers of 581 local governments in 1994 into 60 municipalities in 2021. The municipal level comprises seven city municipalities (miestas), 43 district municipalities (rajonas), and 10 “common” municipalities. Following the amalgamation process, Lithuanian municipalities are now among the largest in Europe and the OECD. The average size of municipalities is close to 47 000 inhabitants (vs. 10 250 in the OECD and 5 960 in the EU), while the median size is around 26 500 inhabitants. Only 3% of all municipalities had fewer than 5 000 inhabitants in 2021, while 72% have more than 20 000 inhabitants (vs 33% in the OECD and 26% in the EU). Since 2000, the population has declined by a fifth in the country. The demographic change has been uneven across the country. It dropped between 6% and 12% in the largest cities (Kaunas, Klaipėda, Panevėžys and Šiauliai), at the exception of Vilnius where the population grew by 4% between the 2011 and 2021 census. Vilnius, the capital city, has around 560 000 inhabitants (ie a fifth of the country population). The largest population drops were recorded in Pagėgiai municipality, Skuodas, Pakruojis, Kelmė and Ignalina district municipalities, which have lost around one-fifth of their population since 2011.

All municipalities have the same organisation, status and competences. The municipal council (savivaldybés taryba) is the municipality's legislative and decision-making body and is made up of members elected by direct universal suffrage for four years. Since the municipal elections in 2015, mayors (meras) are directly elected by popular vote at the same time as municipal councils, for four years. They are the head of the municipality and local civil service, and chair local council meetings. The local council also elects a director of administration who is in charge, for up to four years, of all executive tasks. The last municipal elections were held in 2019. The local council has the power to establish smaller territorial units (seniūnija) that, acting in a certain territory of the municipality, provide daily local services to citizens in a given municipal area. There are around 545 wards (called “elderships” and which derive from former municipalities), each headed by a civil servant appointed by the director of municipal administration. Vilnius has 21 elderships. From 2017, municipal councils can give districts that meet certain criteria set by law the ability to manage their own budgets.

HORIZONTAL COOPERATION: Inter-municipal co-operation in infrastructure and public services delivery is weak in Lithuania. The LLSG enables municipalities to enter into contracts to perform services jointly with other municipalities. It also allows them to delegate some administrative or public services to other municipalities, but there are no specific organisational arrangements for inter-municipal co-operation and little past experience to draw on. In 2019, the central government established two pilot projects to promote inter-municipal co-operation in regard to local investment (Tauragė+ and Šalčininkai+). The projects aim to encourage municipalities to co-operate on public services and other functions within functional zones. Four municipalities participate in Tauragė district and two in Šalčininkai district. The initiative is expected to include more municipalties and to be extended to other districts in the future. Since the approval of the White Paper in 2017 and the amendment of the law on Regional Development in 2020, the role of RDCs has also been strengthened to promote the cooperation between municipalities (see above).

The Association of Local Authorities in Lithuania (ALAL) aims to implement the provisions of the European Charter of Local Self-Government and to foster co-operation and co-ordination between local governments in the areas of investment, business support, public security, education, culture, healthcare, social protection, local services, etc.

STATE TERRITORIAL ADMINISTRATION: There are ten regional development councils, which are deconcentrated entities of the central government. Their functions have been increased through several amendments of the law on regional development over the past years (see above).

Municipal competences were set by the 1992 Constitution and by the Art. 5 of the 1994 Law on Local Self Government (last amended in 2014). The abolition of state counties in July 2010 led to the transfer of their competences to municipalities (eight functions primarily in healthcare, education and social services) and to the central government (22 functions).

In 2012, a pilot project of social assistance decentralisation was launched in five cities, giving municipalities full management responsibility. In 2015, following the success of the pilot project, municipalities were also transferred responsibilities. For instance, the funding of social assistance became an independent municipal function.

Municipal competences are divided into either independent or delegated responsibilities. Independent competences include responsibilities in many areas while delegated competences comprise the participation in labour market policy, agriculture and rural development, among others. Despite this classification, the assignment of responsibilities across levels of government lacks clarity. Despite the wide range of areas over which municipalities exercise some responsibilities, municipalities primarily carry out an implementation role, and have relatively limited regulatory powers.

Main responsibility sectors and sub-sectors
SECTORS AND SUB-SECTORS	Municipal level
1. General public services (administration)	Establishment and maintenance of municipal establishments; Public registry services (delegated)
2. Public order and safety	Civil protection and fire protection (delegated)
3. Economic affairs / transports	Local economic development and tourism (independent); Local roads and public transport (independent); public areas (independent); Administration and registration of agriculture (delegated); Local labour market measures (delegated)
4. Environment protection	Environment (independent)
5. Housing and community amenities	Territorial planning (independent); Waste and sanitation (independent); Supply of potable water (independent), supply of heat (independent); Housing, Cemeteries
6. Health	Primary Health care and public health services (independent); Organisation of secondary health care (delegated)
7. Culture & Recreation	Libraries, Local cultural centres and museums ( (independent); Management of local archives (delegated)
8. Education	Pre-school, primary and secondary (partly independent and delegated); Adult education (vocational training)
9. Social Welfare	Social services (independent); Calculation and payment of social benefits and compensations (delegated); Protection of children’s rights (delegated)

Scope of fiscal data: municipalities, budgetary organisations (schools, kindergartens, social care institutions, local museums, libraries), enterprises controlled by local government (Vilnius City Housing, Vilnius Development Company) and public health care institutions established by municipalities.

SNA 2008

Availability of fiscal data: High

Quality/reliability of fiscal data: High

GENERAL INTRODUCTION: The Constitution specifies the overall legal framework for the budget and the budget responsibilities of the parliament and the government. Additionally, the Law on the Budget Structure, enacted in July 1990, defines the contents of the state and municipal budgets and the legal grounds for raising revenues. Municipalities draft and approve their budgets, have the right to establish local levies and provide for tax and levy concessions at the expense of their own budgets within the limits and according to the procedure provided for by law (Art. 121). The national budgetary system consists of an independent state budget, as well as independent municipal budgets (Art. 127). They must be approved for one year and include current services estimates for three years. The state budget and the main financial indicators of municipal budgets are approved by the Parliament in the Law on Approval of the Financial Indicators of the State Budget and Municipal Budgets. The law determines central transfers to municipalities, financial indicators that municipalities must follow in their budget preparation, municipal debt and net borrowing limits.

The major legal acts ruling the budgetary autonomy of local governments are the Law on Methodology for the Establishment of Local Government Budgetary Revenue, the Law on Budget Structure and on Local Government, the Law on the Methodology of Municipal Budget Income Estimation, and the Law on State and Local Government Budget. The laws give municipalities the right to freely use over 60% of their financial resources for the exercise of independent functions assigned to them by law. The remaining 40% are made up of special targeted subsidies, which are allocated either for state-delegated functions or for municipal investment projects financed according to the State Investment Programme.

In 2020, through the Law on Strategic Management of the Republic of Lithuania, the government reformed its budgetary system to improve strategic management and result-oriented monitoring. The law established a new integrated model of strategic management, which includes strategic planning, regional development and spatial planning processes to ensure efficient planning and use of public finances in line with national development programmes.

Subnational government expenditure by economic classification
	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total expenditure	3 813	9.7%	22.7%	100.0%
Inc. current expenditure	3 128	8.0%	21.1%	82.0%
Compensation of employees	2 015	5.1%	45.4%	52.8%
Intermediate consumption	723	1.8%	41.2%	19.0%
Social expenditure	174	0.4%	2.7%	4.6%
Subsidies and current transfers	214	0.6%	11.9%	5.6%
Financial charges	2	0.0%	0.7%	0.1%
Others	0	0.0%	20.0%	0.0%
Incl. capital expenditure	685	1.8%	34.5%	18.0%
Capital transfers	18	0.1%	6.0%	0.5%
Direct investment (or GFCF)	667	1.7%	39.5%	17.5%

EXPENDITURE: Lithuanian subnational government spending as a percentage of GDP and public expenditure is well below the OECD average for unitary countries (12.7% of GDP and 27.5% of public expenditure) and the EU27 average (respectively 18.3% and 34.3% in 2020). The share of subnational government staff expenditure in subnational expenditure is one of the highest in the OECD and in the EU27 (30.2% in the OECD on average and 32.1% in the EU27 in 2020). The share of subnational government staff spending in total public staff spending is also high, above the OECD average for unitary countries (41.4%) but lower than the EU27 average (53.6%). One explanation is that subnational governments in Lithuania have significant competences in the health and education sectors and are responsible for the payment of teacher salaries and of health administrative staff. By contrast, municipalities play a minor role regarding current social protection expenditure (2.7% of total current social spending vs 10.8% in OECD unitary countries and 13.5% on average in EU27 countries in 2020).

DIRECT INVESTMENT: subnational governments are responsible for around one-third of the general government direct investment, which is significantly below the OECD average for unitary countries (48.9% in 2020) as well as the EU27 average (54.4%). In addition, municipalities are heavily depend on national and EU funds for investment. The share of subnational government investment in GDP (1.7%) is close to the OECD average for unitary countries (1.9%) and the EU27 average (1.8%). subnational government investments are dedicated primarily to economic affairs and transport (43.6%), education (14.6%), recreation and culture (12.8%) and housing and community amenities (12.6%).

In order to boost public investment, the Public Investment Development Agency (VIPA) was established in April 2013. Municipalities are also entitled to receive EU funds to improve their infrastructure and the National government encourages them to invest in such projects through the VIPA. Municipalities benefit from several investment funds, managed by VIPA, which are specialised by sectors (e.g. municipal buildings, culturage heritage, water supply, street lighting, energy). The creation of a National Development Bank is currently being discussed, which would consolidate the three existing financing agencies (the state-owned credit guarantee agency INVEGA, the Public Investment Development Agency VIPA and the Agricultural Loan Guarantee Fund), in order to facilitate the financing of long-term strategic investments and to provide countercyclical lending during economic slowdowns. In addition, the Ministry of Finance created a lending facility of EUR 17 million in 2019 and EUR 9 million in 2020 to encourage municipalities to implement high-quality investments (e.g. contributing to regional development or reduce budget expenditure). 26 municipal projects were financed for a total of EUR 13.6 million in 2019.

Municipalities also use public-private partnerships (PPPs), mostly concessions, to finance infrastructure investment projects. As of January 2020, 28 municipalities contracted 55 PPP projects. All of them are under concession partnership agreements, at the exception of one. Lithuanian municipalities typically recourse to PPP agreements for street lighting projects, culture, sports and leisure facilities, waste management and energy. However, projects conducted at the municipal level are often small and not pooled, making municipal involvement in a PPP agreement costly (as they have a limited number of providers) and time-consuming. The Central Project Management Agency and the PPP Competence Centre provide support to local authorities to develop and negotiate PPP projects (e.g. methodological guidance, tools for preparation and evaluation). Vilinus and Kaunas cities have also specialised units to deal with PPPs.

Additionally, land value capture instruments are being developed. A 2020 law on municipal infrastructure enables municipalities to establish funds by collecting a fee from investors.

Subnational government expenditure by functional classification
	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total expenditure by economic function	3 283	8.5%	-	100.0%
1. General public services	201	0.5%	4.0%	6.1%
2. Defence	2	0.0%	0.3%	0.1%
3. Security and public order	39	0.1%	7.3%	1.2%
4. Economic affairs/transports	383	1.0%	33.1%	11.7%
5. Environmental protection	125	0.3%	90.4%	3.8%
6. Housing and community amenities	174	0.5%	92.5%	5.3%
7. Health	615	1.6%	18.2%	18.7%
8. Recreation, culture and religion	230	0.6%	50.7%	7.0%
9. Education	1178	3.0%	65.9%	35.9%
10. Social protection	336	0.9%	7.1%	10.2%

The largest category of subnational government spending in Lithuania is education, which represented 35.9% of total subnational government expenditure in 2019 (vs 18.5% in the EU27 on average). This reflects the extensive responsibilities that municipalities have in this area, although about half of their spending in education comes from state earmarked transfers. Health is the second main item of subnational government expenditure (18.7% to be compared to 14.5% in the EU27). Municipalities own a large share of the primary care centres, polyclinics and small-to-medium size hospitals, and they are responsible for delivering numerous public health activities. Municipalities are also progressively setting up, running, or contracting with Public Health Offices. The acitivity of these municipal health offices have been enhanced in 2019 in order to improve the provision of public health services. As such, the special targeted grant transferred from the state to municipalities for health was increased in 2019, which in turn raised public health professionals’ salaries by around 80%, their competences have been expanded and the offices have been assigned priority areas of operation and evaluation criteria. Other major categories of spending include economic affairs and transport (11.7%) and social protection (10.2%), the latter being a growing area for municipal intervention since 2012. However, despite the important social programmes that have been put in place in order to deepen the decentralised scheme of social welfare, responsibility transfers have not been fully accompanied by an increase in local finances, which might create fiscal and social problems in the long term. In addition, some responsilbilties have been reassigned to the central government, such as protection of children’s rights in 2018.

In 2019, municipalities carried out more than 90% of public spending in housing and community amenities (92.5%) and in environmental protection (90.4%), followed by 65.9% of total public spending in the education sector and around half in the recreation and cultural sector (50.7%).

Subnational government revenue by category
	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total revenue	3 783	9.7%	27.1%	100.0%
Tax revenue	135	0.3%	1.7%	3.6%
Grants and subsidies	3 393	8.7%	-	89.7%
Tariffs and fees	207	0.5%	-	5.5%
Income from assets	32	0.1%	-	0.9%
Other revenues	17	0.0%	-	0.4%

OVERALL DESCRIPTION: Municipalities are highly dependent on central government transfers and subsidies, which represented almost 90% of their revenue in 2020 (compared to 53.3% on average in OECD unitary countries and 46.6% in the EU27). Taxes and other own-source revenues (tariffs and fees and property income) accounted for about 10% of subnational government revenue in 2020. Taxes, in particular, play a small role in municipal budgets, accounting only for 3.6% of subnational government revenue (vs 35.4% on average in the OECD unitary countries and 40.1% in the EU27). The budget of the Vilnius municipality is the largest of all the municipal budgets in Lithuania; however, in terms of financial independence, its situation is analogous to other Lithuanian municipalities.

It is important to note that since 2014, and the implementation of the SNA 2008 accountability system, personal income tax (PIT) proceeds redistributed by the central government to subnational governments are no longer considered to be ‘tax revenue’ in the form of a shared tax but rather considered as ‘transfers’ determined by a per-capita system and for fiscal equalisation purpose. Hence dropping the ratios related to tax revenue since 2013 in Lithuania.

TAX REVENUE: Most municipal taxes are own-source taxes, which was a result of the 2014 reform of the SNA. Since the reform, revenue from the PIT are classified as transfers and no longer as tax revenue. Some shared taxes remain however, in particular the tax on pollution (paid by individuals and companies that emit pollutants from stationary and mobile sources) and the tax on state natural resources. For both taxes, a fixed share of 70% of total income is attributed to local budgets.

Municipal own-source tax revenues consist primarily of two recurrent taxes on immovable property, on real estate and on land respectively. Overall, these two taxes accounted for 82.4% of municipal tax revenue and 2.9% of their revenue in 2020. It amounted to 0.3% of GDP, which is one of the lowest share among OECD countries and well below the OECD average (1.0% in 2019). The tax on real estate is paid by legal entities and physical persons that own or use the real estate. The annual tax rate is set by local municipal councils within limits set by law, between 0.3% and 3% of the taxable value of the real estate. The tax threshold value for exemption is very high given international comparison, which reflects that the tax has been considered as a “luxury tax”, and publicly-owned property are not taxed. The tax is calculated on the basis of the market value of the immovable property, set by the state enterprise Centre of Registers. Regarding the land tax, tax payers are defined as owners of private land located in Lithuania, except forestry land. The tax rate varies from 0.01% to 4% of the taxable value of the land and a specific rate has been established by the municipalities since 2013. Other municipal taxes include a land lease tax applied to state-owned land that is leased for companies at a rate established by municipalities, as well as tax on inherited properties.

GRANTS AND SUBSIDIES: There are two main categories of transfers: a “general budget grant” and specific targeted grants. The “general budget grant” is based on the redistribution of revenue from the PIT, collected by state tax institutions. The Law on the Approval of Financial Indicators of the State Budget and Municipal Budgets establishes yearly the percentage of the PIT falling on all municipal budgets from inflows to the national budget and the amount of grants allocated to municipal budgets based on indices for each budgetary year. In 2020, municipalities received around 47% of the PIT collected. 43% is fixed by law, while the remaining variable share (about 4% in 2020) depends on estimated changes in municipal expenditure that are linked to the central government’s decision and other factors.

The PIT is redistributed through a fiscal equalisation mechanism across local governments to ensure the transfer of resources to the less wealthy municipalities. The criteria used to allocate PIT to the municipalities changed in 2016. Municipalities receive a percentage of the PIT share based on the municipality's projected revenue from PIT per capita compared to the average projected PIT per capita of all municipalities. Municipalities below the average receive a 100% share of PIT, whereas those above are donors. In 2020, 8 municipalities were net contributors to the equalisation system. Until 2019, the central government fully compensated changes in municipal revenue or expenditure directly affected by its decision, by increasing the allocated PIT share. In 2020, a new amendment to the Law on the Methodology for Determining Municipal Budget Revenues was introduced to distribute an additional share of the PIT to municipalities with low economic growth potential, reflected in a growing payroll indicator. The reform aimed at better reflecting municipal efforts in developing economic activity and encouraging them to promote business and attract investment.

Earmarked grants are assigned to specific competences or for implementing particular programmes. Since 2016, these grants also include the EU and other international financial aid funds. Overall, 86.5% of grants were current grants in 2020 and 13.5% were capital grants.

OTHER REVENUE: According to the law on charges, Lithuanian municipalities have the right to determine eleven types of local charges. However, user charges and fees for the provision of municipal services accounted for only 5.5% of subnational government revenue in 2020, a level below the OECD average for unitary countries (9.1%) and the EU27 average (10.3%). Other revenue includes property revenue (0.9%), which comprises sales of assets, leasing of state-owned land and partial privatisation of municipal utilities.

Subnational government fiscal rules and debt
	Dollars PPP / inh.	% GDP	% general government debt	% SNG debt	% SNG financial debt
Total outstanding debt	677	1.7%	3.1%	100.0%	-
Financial debt	496	1.3%	2.5%	73.3%	100.0%
Currency and deposits	0	-	-	0.0%	0.0%
Bonds / debt securities	0	-	-	0.0%	0.0%
Loans	496	-	-	73.3%	100.0%
Insurance pensions	0	-	-	0.0%	-
Other accounts payable	181	-	-	26.7%	-

FISCAL RULES: The Constitutional Law on the Implementation of the Fiscal Treaty includes the balanced budget principle, which entered into force in 2016 and applies to municipalities. It sets that large municipalities whose expenditure exceeds 0.3% of GDP (as of 2020, the municipalities of Vilnius, Kaunas, Klaipėda and Šiauliai) follow a structural balanced budget rule, based on an accrual basis annually. All other municipalities are subject to an annual nominal balanced budget rule in cash terms. Exemptions exist. Municipalities can extend the budget balanced rule over a four-year period (instead of one year) if they participate in the central govenrment’s lending facility created in 2019 (see above). Additionally, a budget deficit up to 1.5% of forecasted revenue is allowed in case of negative output gap, except for large municipalities.

In case of exceptional circumstances, the central government can suspend fiscal rules based on a general escape clause. The Lithuanian government chose not to put on hold fiscal rules during the COVID-19 pandemic for local governments. Instead, it provided municipalities with short-term loans, which will be counted as revenue to not break the fiscal rules in 2020.

DEBT: Limits to local government borrowing are set annually by the government via the Law on the Approval of Financial Indicators of the State Budget and Municipal Budgets. Long-term borrowing is restricted to financing investment (“Golden Rule”) and the issuance of municipal bonds on capital markets is not authorised. Short-term loans are allowed in order to finance investment projects, to cover debts, to cover temporary income shortfalls or to provide guarantees for loans to companies controlled by the municipalities. The annual Budget Law sets an annual ceiling on municipal debt, which decreased from 70% to 60% in 2018 (at the exception of Vilnius city - which has a higher limit – for which the limit fell from 135% in 2016 to 75% in 2020). The annual budget Law also sets municipal total net borrowing limits, which are calculated based on the approved municipal budget revenue (excluding state-specific grants). Finally, the amount of municipal guarantees cannot exceed 10% of municipal projected budget revenue (also excluding state-specific grants). In 2015, amendments to municipal borrowing regulations were drafted to reinforce municipal fiscal discipline. The Ministry of Finance must now be informed when local governments take out loans or conduct guarantee operations.

In 2020, total outstanding debt for subnational governments accounted for 1.7% of GDP and for 3.1% of the general government debt, two ratios well below the OECD average for unitary countries (14.5% of GDP and 10.5% of public debt). The financial debt (“Maastricht debt”) accounted for 73.3% of outstanding debt (1.3% of GDP and 2.5% of public debt), while other accounts payable accounted for the remaining part (26.7%). Financial debt is made up of loans only.

TERRITORIAL MANAGEMENT OF THE CRISIS: The COVID-19 crisis was mostly managed centrally through the Ministry of Health, but also through the State Emergency Operations Centre. It coordinated the pandemic response and its implementation. Decisions from this Centre are made by its emergency Situation Committee, which includes representatives from all ministries, central and local governments, and other significant bodies. The Centre was created before the pandemic to manage emergency responses in case of crisis. Additionally, the government was supported in its decisions by an Independent Advisory Expert. As of April 2021, the National Public Health Centre established a common dashboard to collect both national and municipal data to better assist the government in dealing with the sanitary crisis.

Local authorities played an important role during the pandemic as public service providers, notably since they own most of the primary healthcare centres and small to medium-sized hospitals and provide some public health services. Municipal health bureaus started to provide mental support, without need of a referral, as of September 2020, in response to the restrictive measures on mental health. Municipalities also set up several clinics through ambulatory care providers and testing units in 2020. From 2021 onward, municipalities were responsible for implementing the vaccination programme designed by the central government, which was performed in dedicated centres.

EMERGENCY MEASURES TO COPE WITH THE CRISIS AT THE DIFFERENT LEVELS OF GOVERNMENT: The central government provided short-term loans to municipalities in 2020 to sustain their liquidity and allow them to meet their balance budget rule. A share of the funds transferred was transformed into exceptional grants in 2021 and has not had to be refunded (under normal circumstances, short-term loans provided by the central government to municipalities must be refunded within one-year). The central government increased the municipal budget revenue by almost 11% in 2021 to compensate for the revenue loss of 2020. Municipalities were also authorised to borrow up to EUR 58 million if needed.

To support households during the pandemic, municipalities were able to provide cash payments (grants, allowances, credit guarantees, etc.) and in kind payments (e.g. free mental heath care, free food for students).

IMPACTS OF THE CRISIS ON SUBNATIONAL GOVERNMENT FINANCE: The pandemic negatively impacted the Lithuanian economy, with unemployment rising from 6.3% in 2019 to 8.2% in 2020, although it showed disparities. Municipalities relying on tourism and services, such as Druskininkai and Birštonas in the South or Neringa and Palanga on the coast, were more affected than other municipalities. By contrast, metropolitan areas with strong public sector and IT services were more resilient. According to the national Employment Service, unemployment increased in 42 municipalities in January 2021 (mainly Druskininkai, Kaunas, Pakruojis districts, Birštonas and Palanga municipalities), was stable in 4 and decrased in 14.

Municipal revenue increased by 12.9% between 2019 and 2020 due to higher transfers from the central government (+15.3% of grants and subsidies) to compensate for higher municipal spending. Municipal tax revenue was quite resilient (-1.0% in 2020) as they mostly rely on the property tax. Fees and charges decreased heavily (by 7.9% in 2020) due to the lockdown measures. As municipal revenue is primarily derived from central government grants, the main impact of the crisis was on the expenditure side. Municipal spending increased by 14.8% in 2020 compared to 2019, of which 10.7% for current expenditure and 38.6% for capital expenditure. The highest costs were estimated to be for small municipalities.

Municipal debt increased by 19.1% between 2019 and 2020 as the 2019 level was very low. This was entirely financed by loans, which increased by 20.9% in 2020.

ECONOMIC AND SOCIAL STIMULUS PLANS: The government established a national Recovery and Resilience Plan in line with the EU Recovery and Resilience Facility (RRF). As part of the RRF, it will receive EUR 2.2 billion in grants from 2021-2026 to finance the implementation of crucial investment and reform measures to recover from the pandemic. 37.8% of the Lithuanian plan will be allocated to the green transition and 31.5% to digital transformation. Reforms and investment in education and healthcare will be also accelerated as part of the plan. Additionally, the creation of a National Development Bank, which would consolidate the three existing agencies (see above), is currently being discussed.

At the municipal level, the two largest municipalities also developed post-COVID-19 Economic Development and Management Plans in May 2020 to sustain local economy and recovery over the long-term (“Vilnius 4x3” for the Vilnius city municipality and the “Economic Development and Covid-19 Management Plan” for the Klaipéda city municipality).