2016-05-18
IMF: Lithuania’s financial system is stable, but it is necessary to implement reforms in the credit union sector
According to the most recent International Monetary Fund’s (IMF) Lithuania evaluation report, Lithuania’s financial system is stable and well-capitalised, a moderate increase in bank lending has a positive effect on the country’s economic growth prospects. IMF experts also propose to strengthen the credit union sector and implement the sector’s structural reform.
Although bank income decreased due to the adoption of the euro and the impact of negative interest, domestic banks have managed to maintain stable profits by reducing their costs. For the first time since the 2008–2009 financial crisis, last year bank credits to the private sector grew steadily, and this has a positive impact on economic growth prospects.
IMF experts have noted that some of the measures for strengthening the credit union sector have been recently adapted, but there is agreement on the need to implement structural reform in the sector, approving the Bank of Lithuania and Ministry of Finance-prepared legislation currently under discussion in the Seimas.
Lithuania has been a member of the IMF since 1992; 189 countries belong to this international monetary institution. The cooperation of Lithuania and the IMF is based on consultations in Article IV of the IMF Articles of Agreement. This Article of the Agreement obligates the Member States to implement economic and financial policy ensuring national and global financial and economic stability. The IMF carries out regular monitoring of the Member States and provides recommendations for achieving and maintaining the aforementioned stability.
In preparation for annual consultations with Lithuania under Article IV of the Articles of Agreement of the IMF, a mission of the European Department of the IMF worked in Lithuania from 3–16 March 2016. The IMF experts analysed the general macroeconomic situation in Lithuania, assessed economic development patterns, the situation in the financial sector as well as the implementation of budgetary and social policy measures. On 13 May 2016, the IMF Executive Board concluded the Article IV consultation with Lithuania. The IMF report is published on the IMF website.