U.S. DEPARTMENT OF STATE
LITHUANIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                            LITHUANIA

                     Key Economic Indicators
         (Millions of U.S.dollars unless otherwise noted)


                                     1992      1993    1994 1/

Income, Production and Employment:

Real GDP (1985 prices)                N/A       N/A     N/A
Real GDP Growth (pct.)              -37.7     -17.1   -13.0
GDP (at current prices) 2/        6,191.5   2,725.0   909.5
By Sector:
  Agriculture                       229.0     305.2   266.3
  Energy/Gas                          154       158     N/A
  Manufacturing                       228       733     275
  Construction                      340.9     215.2    48.6
  Rents                               N/A      19.1     N/A
  Financial Services                 52.9      98.1   771.7
  Other Services                    102.0     449.6     N/A
  Government/Health/Education         N/A     262.2     N/A
Net Exports of Goods & Services     852.3   1,242.2     N/A
Real Per Capita GDP (1985 base)     470.5     684.0   682.0
Labor Force (000s)                  1,879.0 1,859.3     N/A
Unemployment Rate (pct.)              1.2       3.6     3.2

Money and Prices:  (annual percentage growth)

Money Supply (M2) 3/                  N/A     680.2   771.7
Base Interest Rate 4/                 120        95      95
Personal Saving Rate                  N/A       N/A     N/A
Retail Inflation                    1,163       270     180
Wholesale Inflation
  Consumer Price Index                N/A      72.2    80.4
Exchange Rate (USD/LT)
  Official                           3.79      4.50    4.00
  Parallel                           3.79      4.50    4.00

Balance of Payments and Trade:

Total Exports (FOB)                 269.3   1,334.0   161.5
  Exports to U.S.                     4.0       4.8     9.0
Total Imports (CIF) 5/              192.9   1,402.2   230.0
  Imports from U.S.                   N/A      26.4    26.0
Aid from U.S.                          10        25      25
Aid from Other Countries            129.9     216.9   408.0
Debt Service Payments (paid)            5        25     N/A
Gold and Foreign Exch. Reserves       232       253     309
Trade Balance                        76.5     -68.2    68.5
  Trade Balance with U.S.             N/A     -21.6   -17.0


N/A--Not available.

1/ 1994 figures are all estimates based on available monthly
data in October 1994.
2/ GDP at factor cost.
3/ In broad money as defined by the IMF.
4/ Figures are actual, average interest rates, not changes in
them.
5/ Merchandise trade.



1.  General Policy Framework

    Since declaring independence in 1990, Lithuania has
implemented reforms aimed at eliminating the vestiges of the
former socialist system.  In 1992, with the help of the IMF and
other international institutions, Lithuania adopted a program
to restrain inflation, reduce price controls, lower the budget
deficit and privatize the economy.  Lithuania has undertaken a
series of price liberalizations, and most price controls have
been abolished.  Most businesses have been privatized and
private citizens are allowed to own land.  The government is
eager to encourage foreign investments and open new trade ties
with the West.  Trade ties with Russia and other former Soviet
republics are expected to continue, but at a reduced rate. 
Lithuania is seeking to further liberalize its foreign
investment laws.  The Lithuanian government is following a
cautious, but Western-oriented program of economic reform in
banking and monetary policies, price structure, tax laws, land
ownership laws, fiscal policy and foreign trade legislation.

    Inflation subsided during 1994 as a result of tight
monetary policies.  Wage restraint, partly through the pursuit
of a tight incomes policy, and significantly reduced subsidies
to state agricultural and industrial enterprises have reduced
the budget deficit.  Tax reform, including the introduction in
mid-1994 of excise taxes and a value added tax, has increased
government revenues.  Social programs and subsidies consume the
bulk of budgetary expenditures.

    In April 1994, Lithuania adopted a currency board
arrangement under which central bank reserve money and 
liabilities denominated in the local currency are fully backed
by foreign exchange at a fixed rate.  Growth in the money
supply is tied to growth in foreign exchange reserves. 


2.  Exchange Rate Policy

    On June 20, 1993, Lithuania introduced its own national
currency, the litas.  In April 1994 the Lithuanian currency
board fixed the rate of exchange at four litas to one U.S.
dollar.


3.  Structural Policies

    Price Reform:  The Lithuanian government has dismantled
most of the centralized price controls formerly imposed by
Moscow.  Prices on most foodstuffs and manufactured goods have
been liberalized.  However, due to market monopolies and
oligopolies in several sectors, the Lithuanian government has
imposed measures to control anti-competition price fixing.

    Tax Policies:  Lithuania has begun to reform its entire tax
system.  In May 1994, Lithuania introduced an 18 percent value
added tax.  The value added tax is applied to most imports. 
Taxes are levied on wages through the personal income tax and
through employees' and employers' contributions to the Social
Insurance Fund.  Enterprise profits are taxed at rates of
between 20 and 30 percent.  Reduced rates apply for
agricultural enterprises, small-scale enterprises, and
reinvested profits.  Joint ventures with foreign capital are
exempt from the profits tax for up to three years.  Profit
taxes of joint ventures are determined by the amount of foreign
investment in the authorized capital and the type of activity
(industrial or commercial).  Dividends to foreign investors
received in Lithuania are exempt from taxes.  Income received
legally by foreign investors and upon which a profit tax has
been paid may be repatriated without additional tax. 

    Regulatory Policies:  There are no performance requirements
imposed by law as a condition for foreign investment.  However,
in tendering bids for purchasing privatized companies or
forming joint ventures with state companies, foreign companies
are often required to offer employment guarantees or
technology.  Lithuanian law gives foreign investors the right
to lease land for 99 years, but bars foreigners from owning
land. 


4.  Debt Management Policies

    Lithuania has acknowledged only that portion of the Soviet
debt incurred by Lithuanian entities for use in Lithuania. 
Negotiations on this matter are in progress.  Lithuania has
received balance of payments support from the European Union
and the G-24 countries.  The IMF has provided a stand-by
arrangement and a systematic transformation facility.  The
World Bank and the European Bank for Reconstruction and
Development have contributed infrastructure and import
rehabilitation loans.


5.  Significant Barriers to U.S. Exports

    There are no direct barriers to U.S. exports.  However,
U.S. exports are adversely affected by the absence of an
established infrastructure for trade, such as in
telecommunications and banking facilities.  U.S. exporters are
also hampered by the lack of import financing and other credit
facilities.  Customs procedures at border crossings are
time-consuming and burdensome owing to the lack of trained
personnel and inconsistent application of customs regulations.

    The May 1991 law on prohibited and limited spheres for
foreign investment determines the areas of economic activity
where foreign investment is prohibited or limited.  Foreign
investment is prohibited in areas of defense and security. 
Foreign investment is also prohibited in state enterprises
holding a monopoly in the Lithuanian market.  These are defined
as enterprises producing more than 50 percent of their goods in
the Lithuanian market.  Enterprises which exploit existing
communications, electricity delivery, gas, oil and water
supply, heating and sewage systems are also considered to be
monopolistic.


6.  Export Subsidies Policies

    The government exercises controls on exports of certain
scarce commodities.  There are no export subsidies.


7.  Protection of Intellectual Property

    Upon regaining its independence, Lithuania declined to
assume formally any binding legal obligations undertaken by the
former Soviet Union.  In the area of intellectual property,
Lithuanian policy has been to observe international standards
and to consider subscribing to international conventions beyond
those accepted by the independent Lithuanian governments before
World War Two.  In 1990 Lithuania joined the World Intellectual
Property Organization (WIPO) and it plans to sign the Paris
Convention for the Protection of Industrial Property.  In April
1994 Lithuania signed an agreement with the U.S. for the
protection of intellectual property.  The Lithuanian parliament
is considering laws for copyright enforcement, including
amendments to the criminal and civil codes.  


8.  Worker Rights

    a.  The Right of Association

    The 1991 Law on Trade Unions and the Constitution recognize
the right of workers and employees to form and join trade
unions and, with certain limitations, to strike.  There are no
restrictions on unions affiliating with international trade
unions.

    b.  The Right to Organize and Bargain Collectively

The Lithuanian Collective Agreements Law confirms the right to
organize and bargain collectively.  Lithuanian trade unions
engage in direct collective bargaining at the workplace as wage
decisions are increasingly being made at the enterprise level. 
The government issues periodic decrees that serve as guidelines
for state enterprise management in setting wage scales.

    c.  Prohibition of Forced or Compulsory Labor

    The constitution prohibits forced labor, and this
prohibition is observed in practice.

    d.  Minimum Age of Employment for Children

    The minimum age for employment of children is 16.  Twelve
years of schooling are compulsory.  These requirements are
enforced through a system of inspections.

    e.  Acceptable Conditions of Work

    By law, white collar workers have a 40 hour workweek.  Blue
collar staff have a 48 hour workweek with premium pay for
overtime.  There are minimum legal health and safety standards
for the workplace.  However, worker complaints indicate that
these standards are sometimes ignored.  The minimum wage is 
adjusted periodically by the parliament, but enforcement of the
minimum wage is almost nonexistent.

    f.  Rights in Sectors with U.S. Investments

    There is only a minimal level of U.S. investment in any one
sector.  Worker rights are applied uniformly throughout the
economy and there are no known exceptions.

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