The Seimas removed the 2% interest rate cap on defence bonds

Today, the Seimas approved the draft amendment to the Law on State Debt prepared by the Ministry of Finance which abolishes the interest rate ceiling for defence bonds. This means that those who purchase defence bonds will be liable to receive interest rate of more than 2%, which will allow to offer issues with longer maturity. The draft amendment to the Law on State Debt was voted by 81 members of the Seimas, without any abstentions.

Minister of Finance Kristupas Vaitiekūnas notes that in order to increase the attractiveness and availability of defence bonds, the Ministry of Finance is consistently implementing innovations in the distribution of defence bonds.

"Some of the innovations started in February - defence bonds now are distributed on a continuous basis, offering more investment periods. At the same time, the Law introduced another novelty - the removal of the 2% interest rate ceiling. This amendment will allow to offer issues with longer maturity, e.g. 2- year, 3-year maturity, etc. As a rule, the longer maturity of the bonds purchased, the higher interest rate is paid", Minister of Finance K. Vaitiekūnas says.

The Minister believes that defence bonds can also become an attractive investment alternative for residents who decided to withdraw from Pillar II pensions. "We aim to make this tool as easily accessible as possible to all those who want not only to invest, but also to contribute to the country's defence funding," K. Vaitiekūnas says.

This Law on State Debt amended the conditions and limits for borrowing by the Government on behalf of the State aimed to finance the projects related to national security and defence implemented by the Ministry of National Defence, i.e. abolished the limit that the annual profitability of the respective borrowing must not exceed 2 %.

With the adoption of the draft Law, the interest paid will be more in line with the average interest rate for borrowing on behalf of the State.

Defence bonds are targeted Government savings notes (GSNs) to finance the defence needs. Since the launch of the distribution of defence bonds in October 2024, the buyers through 26 issues have purchased the bonds for a total of EUR 344.6 million.

More information on defence bonds is available here.