Every year, when we begin discussions about the state budget, the same feeling arises – we start from the wrong end.

There are many arguments about how to spend, but very few about what we will achieve. Ideas on where to allocate funds are plentiful. But everyone knows how to spend. The real challenge is to earn and to invest wisely.

This year, about €23 billion was planned to be collected, but we will spend even more. More than one out of every four euros spent will be borrowed. Servicing the state debt is approaching €1 billion per year, while European Union support, amounting to about €2 billion annually, will decrease in the coming years. This means our room for action will narrow. If we want to grow, we must start calculating the budget like adults – responsibly, clearly, and purposefully.

From Spending to Results

Today, the success of the state is still measured by how much money has been allocated, not by what has been achieved with those funds. This is a flawed approach. The budget should be planned according to impact – with clear, measurable results.

An example can be found in New Zealand. That country’s budget planning is linked to specific impact indicators: how much suicides have decreased, how many more people have found jobs, how children’s health or reading achievements have improved. There, the budget is not a list of expenses, but a tool for measuring real progress.

It is also time for Lithuania to formulate clear goals – not “we will increase” or “we will improve,” but “we will increase X,” “we will achieve Y.” When the numbers are clear, accountability follows.

Areas Where We Must Be Specific

Defense. The government’s decision to continue its commitments and allocate 5.38% of GDP to defense is commendable and necessary. We respect the determination shown by politicians to fulfill commitments and increase investment in national defense. This is a signal that national security remains a priority. Still, the most important thing is not the decimal points, but the goals: how many additional soldiers will be trained, what portion of equipment will be modernized, how readiness for national defense will increase. Only then will we be able to talk about real security, not just about expenditures.

Employment. Only about half of Lithuania’s population is employed – meaning that a large part of society remains outside the labor market. If we achieved the unemployment level of Poland or the Czech Republic, the budget would receive an additional €1 billion every year. Today, the main goal of social policy should be to encourage as many people as possible to work and allow them to earn. This is the most direct path to sustainable economic growth.

Shadow economy and productivity. According to European Commission data, the VAT gap in Lithuania is about 15%. If we reached at least the EU average, the budget would gain another €0.5 billion. We could earn the same amount again by increasing labor productivity by 10 percentage points. These numbers show that the source of revenue lies not in new taxes, but in efficiency.

The Mark of a Mature State – Responsibility

As long as the public sector measures success by expenditures rather than results, we will pay dearly for mediocre service quality. Only by changing our mindset – when the state begins to plan the budget based on impact rather than need – can we talk about true progress.

Wealthy and strong states use their budgets as tools for change. Lithuania can do the same. We only need to start planning the budget like adults – clearly, responsibly, and with a bold view to the future.

Comment by Rolandas Valiūnas, Chairman of the Board of the Investors’ Forum Association