Bank of Lithuania

In July 2002, the balance of payments current account deficit (CAD) made up LTL 181.7 million. Compared to June, it contracted by LTL 96.5 million. The contraction was mainly determined by a significant improvement of the positive balance of services.

In July 2002, compared to July 2001, exports of goods increased. Compared to exports, import growth was faster, which is why the CAD during the month under review went up by LTL 103.6 million against July 2001.

Compared to June, export of services increased in July by 14 per cent, while import of services declined by 0.7 per cent. The growth in the export of services was mostly determined by higher income from travel services (over LTL 21 million). Compared to July 2001, export and import of services increased by 14.2 per cent and 8.8 per cent, respectively. Compared to June 2002, the positive balance of services went up by LTL 65.7 million, and by LTL 42.1 million compared to July 2001.

Payments of dividends by domestic economic entities to non-residents for their investment in Lithuania went down by LTL 11 million in July 2002 as compared to the previous month, while interest on debt securities (mostly eurobonds) increased. The total increase of the negative income balance was LTL 10.4 million.

The negative capital and financial account balance made up LTL 106.7 million. Foreign assets of domestic economic entities (financial claims to non-residents), excluding international reserves, increased by LTL 280 million in July, while international financial liabilities went down by LTL 795.1 million.

The largest investors abroad in July were commercial banks. Their investment in non-resident debt securities amounted to LTL 74.4 million, and other investment was LTL 517.7 million (of which overnight deposits increased by LTL 490.3 million). As trade credit to non-residents declined, the foreign investment flows of
other domestic economic entities were negative (LTL 298.6 million).

The total negative foreign investment flow in Lithuania in July was determined by large negative portfolio investment flows. In July the Government repurchased the previous issue of the Eurobond for LTL 703.5 million. Meanwhile, foreign direct investment flows amounted to LTL 122.7 million.

Other foreign investment flows were negative in July (LTL 26.2 million). In domestic commercial banks these foreign investment flows were positive at LTL 157.6 million (non-resident deposits and balances on correspondent accounts saw a most marked increase). On the other hand, investment flows into other economic entities were negative (LTL 178.6 million).

The redemption of the Eurobond issue by the Government had the largest impact on the contraction of the international reserves. In addition, net sales of the US dollar by the Bank of Lithuania to commercial banks was USD 182.3 million over the review period. As a consequence, the total negative international reserve flows in the balance of payments were LTL 845.7 million.