K. Vaitiekūnas at Bloomberg panel discussion: Lithuania's experience shows that responsibly managed security investment strengthens economic stability

"Russia's brutal war against Ukraine is more than a geopolitical shock for Lithuania, it is a long-term structural change that has changed our fiscal priorities, accelerated defence investment and reaffirmed: security and economic stability go hand in hand," Minister of Finance Kristupas Vaitiekūnas said today at Bloomberg panel discussion "Financing Defense and Driving Investment on the frontline of Europe" in Washington D.C.

In the discussion with Yuriy Heletiy, Vice-Chairman of the Board of the National Bank of Ukraine, and Karl-Christian Agerup, Vice-Chair of the Board of the NATO Innovation Fund, the Minister of Finance presented Lithuania's multi-layered defence and economic financing model, which Lithuania implements by strengthening its defence industry and cooperation with European partners and international financial institutions, while creating favourable conditions for long-term investments in both defence and innovation.

"Today, Lithuania has a diversified and sustainable defence funding model. Our approach combines national budgetary instruments - 5.38% of GDP to defence, participation of individuals and businesses, European Union instruments and investment by international financial institutions in a single sustainable financing architecture with its centre being the National Defence Fund, the value of which is expected to reach around EUR 700 million in 2026", K. Vaitiekūnas presented adding that the involvement of individuals and businesses is a crucial pillar of this model.

National defence bonds have proven to be an effective tool for broadening the financing base and strengthening societal engagement. Since the introduction of national defence bonds in 2024, Lithuania has placed 26 issues, raising around EUR 344 million.

However, the Minister acknowledged that increased defence spending was a major challenge for public finances. "Our defence budget has more than doubled over several years, from 2.52% of GDP in 2022 to almost 5.4% of GDP this year. We plan to maintain this level of funding until at least 2030. We are among NATO leaders in terms of defence spending. Such a rapid shift in spending priorities inevitably posed challenges in managing public finances and ensuring sustainable debt dynamics. Lithuania's experience shows that security and macroeconomic stability are mutually reinforcing factors, therefore, finances must be managed responsibly", K. Vaitiekūnas stated.

Lithuania continues to maintain A-level sovereign credit ratings from key agencies, so for regional and global investors, according to the Minister, this combination of high defence commitments, stable debt dynamics and a predictable policy stance sends an important signal - even under geopolitical pressure, a disciplined fiscal policy enables significant long-term investment in security without compromising access to capital markets and without increasing financial stability risks.

"In order to strengthen the defence industry, the fight against the external aggressor requires the mobilisation of the European Union as a whole", K. Vaitiekūnas stressed. Russia's war in Ukraine has shown that no country can face these challenges alone, that this requires coordinated measures by the European Union as a whole, in particular to expand defence industrial capabilities, speed up procurement and ensure that frontline states have the financial flexibility needed for a rapid response.

"Lithuania is actively increasing its contribution to European security - the construction of the 155 mm Rheinmetall ammunition factory has started in the country, together with state-owned enterprises, and we are constantly looking for new opportunities to develop more active cooperation with other European and US partners," the Minister of Finance assured, adding that in addition to ammunition, Lithuania is also investing in infrastructure, mobility and other dual-use projects that strengthen the resilience of the eastern flank and contribute to wider European security goals.

Lithuania also wants companies developing advanced technologies in the security, digital, green or industrial fields to be able to grow, expand and obtain the necessary capital. This requires not only financial instruments, but also a stable and predictable regulatory environment that gives investors confidence in long-term commitments and does not burden them with additional bureaucratic requirements. At the same time, Lithuania is strengthening its long-term financing ecosystem through ILTE, the national development bank. Over the next four years, ILTE aims to mobilise around EUR 6 billion of investment in innovation-driven and security-related areas, including private loans, venture capital and growth finance.

In the future, according to the Minister, defence funding will depend on a coordinated mix of funding sources: National budgets will remain a key element, but need to be complemented by EU instruments, support from international financial institutions and increased private sector involvement. In addition, the countries should promote a business-friendly environment that facilitates the creation of production capacity.

Minister of Finance Kristupas Vaitiekūnas is visiting Washington D.C. this week to attend spring meetings of the International Monetary Fund (IMF) and the World Bank (WB).