Supporting inclusive growth in Lithuania
Thanks to the CEB’s flexible financing, Lithuania’s central and municipal governments are fulfilling strategic and investment aims, and promoting energy efficiency. The Bank has approved over €350 million in funding to Lithuania since January 2019.
The State Investment Programme is enabling the Lithuanian Government to cover ongoing investment expenditure in the renovation of cultural buildings, healthcare institutions, and educational and sports facilities. This funding will bolster Lithuania 2030, the national strategy focusing on ‘smart society, smart economy and smart governance’.
Since 2014, the CEB has been using a tailored loan instrument - public sector finance facility, or PFF - to part finance Lithuania’s State Investment Programme, usually in important social investments in such areas as education, health and culture.
Why use a PFF to finance this investment?
The CEB strives to provide flexibility to borrowers. Using a PFF to finance Lithuania’s State Investment Programme perfectly suits the needs of the country’s Treasury because it gives access to various financing structures. It allows for the fact that some investments were launched in previous budget cycles while others will be launched in future years.
In January 2020 the CEB approved a €100 million loan to the Government of Lithuania to fund improvement and modernisation of public infrastructure. The latest loan is the third CEB operation to support strategic investment in Lithuania. The first loan, for €100 million, was approved in 2014, and the second, for €130 million, was approved in 2009.
Commenting on the CEB’s involvement in the State Investment Programme, Minister of Finance Vilius Sapoka, says, “We value the CEB’s involvement in financing necessary social investments in the public sector, like the reconstruction of hospitals, schools, libraries, museums and other public buildings. Such investments are very important for the economy - raising social welfare and the wellbeing of the population – and the people of Lithuania are now benefitting from a modernised environment, better accessibility and improved services.”
Martynas Mažvydas National Library of Lithuania, Vilnius
As part of the PFF, CEB funds have financed half of the Library’s 2014-2018 budgetary expenditure and nearly a third of the cost of the reconstruction of the main National Library building. The project has included upgrades to IT services and storage, and enhancements to the Library’s environment for visitors and employees.
Energy efficient living spaces
Another of Lithuania’s challenges is poor energy-efficiency of residential housing. The country’s building stock includes some 39,000 apartment blocks which were built before 1993 and are made from low-quality materials. Inadequate insulation, outdated heating systems and a lack of ventilation all mean that the annual energy consumption of these buildings is twice that of more modern apartment buildings.
The Government of Lithuania has established a special fund to fast-track the renovation of these buildings. The fund is supported by a €100 million loan from the CEB, which will help to renovate 230 buildings across the country. Up to 9,000 households will benefit from reduced energy bills and better quality of life. As well as improving residents’ living conditions, the project will help Lithuania to achieve its climate targets.
Empowering Kaunas to achieve its strategic vision
Kaunas is the second largest city in Lithuania after Vilnius, with almost 300,000 inhabitants. It is an important regional centre thanks to its strategic location in the heart of the country, its role as a centre of industry, trade and business, and its large student population.
Kaunas does, however, have its challenges, which are mainly related to labour migration, inefficient public transport and an ongoing need to enhance public services.
In 2015 the City approved an ambitious strategic development plan. Its vision up to 2022 is to turn Kaunas into ‘a sustainable and civic-minded city leading in advanced business and innovation. A centre of modern and involving culture, home to learning and happy people’.
In 2022 Kaunas will be European Capital of Culture. The City therefore wants residents and visitors to be able to access high quality cultural and leisure activities across the city. The city’s Mayor, Visvaldas Matijošaitis, says, “Every day we seek to make Kaunas a more attractive and convenient city to live in. Modern infrastructure is an essential part of that, as are sports, leisure and other recreational spaces and facilities.”
Focused on the priorities
The CEB is well-versed in financing municipal infrastructure projects and uses different financing methods, including direct lending to cities and municipal companies, and on-lending to commercial banks and specialist lending institutions, to provide the best options for borrowers.
Recently the Bank has approved two loans with Kaunas City Municipality to facilitate upgrades that will provide better access to education, health, sports, social and cultural services and facilities. The first was approved in January 2019 and is being implemented smoothly. The second loan, of €25 million, was approved in January 2020. Projects that enhance central neighbourhoods, landmarks and sports facilities are being prioritised.
Mayor Matijošaitis says, “The CEB has provided funding with very favourable conditions, which contributes significantly to the implementation of the goals defined by the Kaunas strategic plans.
“We are glad to have been able to develop more projects which would have been impossible to realise without CEB support. Residents and visitors are already enjoying a new indoor football field, the Aleksotas viewing deck, and the reconstructed Kaukas Stairs.”
Discover more about the CEB’s approach to flexible financing.