OECD Review of Lithuania’s Independent Fiscal Institution 2025

Executive summary

Lithuania’s independent fiscal institution (IFI), the Budget Monitoring Department (BMD), was established as part of the country’s commitment to sustainable fiscal policy under EU rules upon joining the European Monetary Union. The BMD is housed within the National Audit Office (NAO), making Lithuania one of a small number of OECD countries – alongside Finland and France – where the IFI is linked to the supreme audit institution. This OECD Review assesses the BMD’s progress since its inaugural Review in 2019, using the OECD Principles for IFIs as a benchmark and comparing its development with peer institutions across the OECD.

Since 2019, Lithuania’s public finance landscape has become increasingly complex. Geopolitical challenges have prompted a commitment to increased defence spending, while demographic shifts and healthcare demands continue to exert structural pressure on public finances. At the same time, the government has adopted ambitious tax reforms.

In this evolving context, Lithuania – like all EU Member States – is required to transpose the revised 2024 EU Directive on Economic Governance into national legislation by the end of 2025. The Directive strengthens the role and independence of IFIs, necessitating adjustments to the BMD’s institutional framework to ensure alignment with EU standards. The transposition process is ongoing in EU countries. Among Lithuania’s peer group, Finland has proposed legislation to move its IFI from the supreme audit institution into a distinct independent body. There is a broad international trend towards greater IFI visibility – i.e. broader awareness of the institution and its work - which Lithuania will also need to address to remain aligned with peers. Domestically, recent changes – including the appointment of a new Auditor General, a newly formed government, and significant turnover in parliamentary membership – further highlight the importance of institutional clarity and resilience.

Progress since the 2019 OECD Review

The BMD has made important technical improvements since the 2019 OECD Review, including publishing macroeconomic forecasts, stabilising its staff base, and improving the clarity of its outputs. However, core recommendations from the earlier Review relating to institutional independence remain unimplemented.

The BMD’s current placement within the NAO continues to blur the distinction between fiscal oversight and audit functions. Despite earlier rebranding efforts, stakeholders often continue to associate its reports with the audit function of the NAO. This institutional arrangement risks limiting the BMD’s effectiveness, given that it limits its independence, visibility, and impact.

External visibility has diminished in recent years. The removal of the BMD’s dedicated webpage1, the discontinuation of regular press briefings, and limited media coverage have reduced the reach of its analysis. While the BMD’s outputs remain technically robust, their influence on the broader fiscal debate has been constrained, and opportunities to contribute to the wider fiscal policy debate has been limited. Many stakeholders do not yet regard the BMD as a primary or authoritative source of fiscal information, which limits the visibility and impact of its work. As a result, the institution has not fully capitalised on opportunities to inform and contribute to ongoing and emerging fiscal policy discussions. However, the success of the BMD’s 2025 conference on demographic change and fiscal sustainability highlights a clear appetite for informed, independent commentary on Lithuania’s long-term fiscal challenges.

The 2024 EU Economic Governance reforms set out strengthened requirements for IFIs, including structural independence, adequate resources, and a clear legal mandate. Lithuania’s fiscal context – marked by rising defence expenditure, demographic pressures, and tax reform debates – reinforces the need for an institution that can provide timely, visible, and independent analysis to support informed decision-making.

Summary of recommendations

To address these challenges and support the BMD’s continued development, the OECD review recommends that Lithuania focus on three interrelated priorities:

1. Strengthening institutional independence and leadership

Establish the BMD as a fully independent fiscal council in law, with its own mandate, legal personality, and budget line. Ensure that the design of the strengthened institution is subject to open debate and formal approval by parliament, reinforcing its legitimacy. Introduce independent leadership through transparent, merit-based appointment procedures, underpinned by statutory safeguards for expertise, tenure, and dismissal. Consider involving the parliamentary committee in a secondary approval role to further strengthen the legitimacy and transparency of the appointment process.

2. Ensuring a clear mandate with commensurate resources

Clarify and expand the BMD’s mandate to fully align with the 2024 EU Economic Governance Framework, including assessment of the national budgetary framework, ex post evaluation of forecasts, and requirements that the government must either comply with the BMD’s assessment or publicly explain why not. Ensure resources commensurate with this expanded mandate for the BMD.

3. Enhancing visibility and impact

Strengthen the BMD’s public identity and communications strategy so that its analysis has a broader reach - empowering political and public understanding of key fiscal issues. A dedicated website, regular public engagement, and proactive commentary on budgetary issues would reinforce its credibility as an independent fiscal advocate.

These recommendations build on those of the 2019 OECD Review and aim to ensure that the BMD performs its duties as Lithuania’s IFI in an effective and sustainable way. They also position the institution to play a central role in supporting fiscal sustainability and public understanding of budget choices – at a time when Lithuania’s fiscal context demands stronger institutions and clearer voices.

Note

← 1.  The BMD instead has a dedicated section on the NAO website.