Forecasts suggest that Russia's restrictions on imports from the European Union will have a negative effect on Lithuania's economy; however, this will not affect the country's 2015 defence budget, Prime Minister Algirdas Butkevičius says.
Algirdas Butkevičius
© DELFI / Šarūnas Mažeika

"I must say we're watching the geopolitical situation very closely and the Finance Ministry will next year provide an updated forecast of macroeconomic indicators. I must say – they will be lower because the biggest economic effects of the Russian sanctions are on Lithuania. We have to be realistic, but the agreement is that it should not affect the defence budget," Butkevičius told the Žinių Radijas radio on Thursday morning.

He restated that the plan was to raise defence budget by about 400 million litas (EUR 115.9m). Butkevičius also noted that the US commitment to defend the Baltic States in case of aggression, which President Barack Obama restated on Wednesday, should be followed by the Baltic "commitment to ensure bigger funding for defence and security".

The prime minister said the updated forecast of macroeconomic indicators will be announced on 8 September.

Lithuania's political parties have signed an agreement stipulating that the commitments of earmarking 2 percent of the gross domestic product (GDP) for defence should be met by 2020, a goal that was commended by Obama on Wednesday.

In mid-July, the Ministry of National Defence said that next year's defense budget should rise to 1.381 billion litas, i.e., about 1.03 percent of the GDP.

This year's defense budget was planned at 980 million litas but was boosted with additional 130 million litas in the middle of the year in the wake of the Ukrainian crisis.

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