Minister of National Defence Robertas Kaunas, Minister of Finance Kristupas Vaitiekūnas and members of the European Commission (EC) Andrius Kubilius and Piotras Serafinas signed and agreement on a 6.375 billion loan to Lithuania under the SAFE (Security Action for Europe) regulation. SAFE favourable loans are intended to support strengthening resilience and defence of the member states. Lithuania will receive the first advance payment within three month of the agreement signature.
“The SAFE loan is first and foremost an investment in the security of Lithuania and the whole Europe. The financial instrument will be sufficient for half of the needs of the development of the National Division. We are fully prepared for project execution with over two thirds of the needed projects already in contracts and signed. SAFE funding supports a timely arrival at the goals set for defensive capability development required to ensure peace in Lithuania,” says Minister of National Defence Robertas Kaunas.
“SAFE is a crucial instrument, particularly for the Eastern European member states. It is an accelerator to our defensive capacity. The funding enables us to stop planning for the decades ahead and start acting here and now. It gives a tangible foundation for our goal to fully form a complete and modern Division equipped with the most advanced weaponry, not in five years but tomorrow, securing our borders against potential aggressors even better. This is a milestone for Europe as well as it strengthens defence industrial cooperation and helps to integrate national suppliers in European supply chains, thus creating a more coordinated, stronger and more effective European defence,” says Minister of Finance Kristupas Vaitiekūnas.
SAFE loans are an alternative source of financing that enables the implementation of scheduled budget investments in more favourable conditions and the optimisation of loan service costs. This also allows to diversify borrowing sources and avail of extra favourable loan conditions offered by the European Commission thus cutting overall costs of the financing in the long-term.
The SAFE regulation offers particularly favourable borrowing conditions. The loan repayment term extends for 45 years while the interest rates are the same as in EC borrowing. Moreover, the SAFE loan has a 10-year grace period which means that Lithuania will be paying the interest for 10 years and begin repaying the debt only later.
Each loan is issued in accordance with market rates of the issuance time, different to every loan. It is natural because the European Commission takes out loans for different periods and the loan term is long (45 years). The interest rates are updated automatically when the European Commission refinances maturing issuances.
Member states wishing to take out the favourable SAFE loans first needed to express the interest in the instrument and indicate preliminary minimal and maximal loan amounts. After all the requests were considered by the European Commission, Lithuania was granted EUR 6 375 487 000 under SAFE.
The Ministry of Finance will present payment requests to the European Commission on a periodical basis. These will include information on indicators achieved so that Lithuania is able to secure partial disbursement of loan funds. THE mentioned indicators concern project implementation, for instance, announcement of a public procurement, advance payment paid to the manufacturer, partial delivery of equipment, complete payment made, full equipment delivery made, etc. .
The application prepared by the Ministry of National Defence indicated development of the National Division as the loan purpose, as well as air defence in significant part. The funds will also pay for combat, support and logistical systems, as well as vital ammunition stocks, and the Baltic Defence Line – countermobility measures and mines, support and development of other Lithuanian Armed Forces capabilities.
SAFE is a temporary instrument of the European Commission of loans for strengthening defence. It will be available till the end of 2030. The programme enables EU member states to carry out joint defence procurements in priority areas – from ammunition and land force to air defence, maritime capabilities, cyber and AI.
