Lithuania rating affirmed at A+ as Fitch flags defense spending and debt rise
Lithuania keeps its A+ long-term issuer ratings with a Stable Outlook as strong growth, EU and eurozone membership, and a credible policy framework continue to support the sovereign profile. The assessment also highlights mounting defense costs, rising public debt and inflation, while geopolitical exposure near Russia and Belarus remains a key constraint.
Highlights
- Lithuania's Long-Term Issuer Default Ratings affirmed at A+ with Stable Outlook by Fitch, citing resilient economic performance and strong institutions despite geopolitical risks.
- Fitch projects Lithuania's general government deficit will rise to 2.8% of GDP in 2026 and 3.4% by 2028, driven by higher defense and social spending.
- Gross general government debt forecast to increase from 39.5% of GDP in 2025 to 51.1% in 2028, remaining below the projected A median of 58.3%.
Rating rationale and fiscal outlook
As reported by Fitch Ratings, the agency has affirmed Lithuania's Long-Term Issuer Default Ratings at A+ with a Stable Outlook, citing resilient economic performance and institutional quality above the median for A-rated peers. Fitch says the sovereign is supported by a credible policy framework, moderate though rising debt and debt-servicing costs, while the small size of the economy and elevated geopolitical risks continue to weigh on the rating.The Stable Outlook reflects Fitch's assumption that Russia-related security risks remain broadly unchanged over the medium term. The agency also expects stronger economic growth and fiscal adjustment to help stabilize public debt relative to GDP below the peer median, even as Lithuania maintains high military spending.
Fitch expects the general government deficit to widen to 2.8% of GDP in 2026 and to 3.4% in 2028, above the projected A median of 3.1%. Higher defense and social spending, together with rising debt servicing costs, are the main drivers, although the scale and timing of widening still depend on military equipment deliveries.
The agency projects gross general government debt to rise to 51.1% of GDP in 2028 from 39.5% in 2025, while remaining below the projected A median of 58.3%. It says debt continues rising beyond 2028 at a slower pace, driven largely by defense-related stock-flow adjustments and social security fund surpluses that build assets instead of reducing debt.
We previously reported on how persistent geopolitical tensions, alongside elevated fiscal spending, are increasing borrowing and refinancing risks for sovereigns in a higher-rate environment. Our earlier coverage noted that prolonged shocks can squeeze fiscal headroom through higher inflation and debt-servicing costs, with emerging and frontier markets facing the sharpest pressure due to narrower revenue bases.
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