Transformations  in
Business & Economics

Transformations of Local Government Finance in Lithuania during the Transition
Gerda Žigienė

ABSTRACT. There has been little work undertaken to research the transition of public finance in Lithuania. The focus has predominantly been on banking and financial issues facing countries in transition. Public finance as a topic has largely been neglected both in the West and in Eastern European countries. Lithuanian local government operates in a rapidly changing environment. The structure of Lithuanian local government finance is continually being revised as well. Throughout the past fourteen years of transition, changes have been made to the number of layers of local government, the number of municipalities, the taxes used to fund local government, and the types of grants paid by the state to municipalities. These changes continue to the present day after a fairly radical reorganisation of municipal funding in 2002. The main aim of the paper is to provide a critical account of developments in public sector finance in Lithuania during the transition and to point out how some current problems may be resolved.

KEYWORDS: fiscal policy, public expenditures, investment and finance, taxation, Lithuania.

JEL classification: H30, H7, G18, P2.