Lithuania - Domestic policy



Paksas has promised to pay a great deal of attention to the domestic economy, and to raise the living standards for all Lithuanians. He has called for a reduction in taxes and has pressed the EU—which Lithuania was invited to join in December 2002—for higher agricultural subsidies and larger compensation for the closure of Lithuania's nuclear power plant in Ignalina. Paksas is determined to fight corruption as a way of improving Lithuanian civil society.

After Lithuania gained independence in 1991, it embarked on a wide program of economic reform, including the establishment of a central bank, the privatization of state-owned companies, price liberalization, and the creation of a national currency and private banking structure. Lithuania was hard-hit by the Russian currency crisis of 1998, as it was highly dependent upon Russia for its exports. Lithuania's exports to Russia accounted for 24.5% of total exports in 1997, but that figure had been reduced to 6.2% in 1999. The economy was in a severe recession in 1999, but began to slowly recover in 2000. GDP growth is predicted for 4.5% in 2003, and unemployment is forecast at 10.5%. Inflation is expected to rise from 1% in 2003 to 1.8% in 2004.

The EU is currently Lithuania's largest trading partner, accounting for 50% of exports and 46% of imports. However, Lithuania has to increase the quality of its goods and its marketing strategies to improve its competitiveness in the EU and other Western nations. Lithuania's privatization program has been successful, especially with small businesses—7,000 state-owned companies have been privatized since independence. In February 2003, the IMF praised Lithuania for its economic policies, including GDP growth, a decrease in unemployment, a lower-than-predicted deficit, and near-zero inflation. It is up to Paksas to continue to pursue the success gained by previous administrations.

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