Luxembourgish Parliament Debates 2024 Budget, Focusing on Economic Diversification and Sustainable Finance

The Luxembourgish Parliament is currently engaged in debates over the 2024 budget, which includes discussions on the multi-annual budget for 2023-2027, the Stability and Growth Programme (SGP), and the National Reform Programme (NRP). The debates, which commenced on Wednesday, are set to continue on Thursday afternoon, with the adoption of the 2022 State accounts and the 2022 accounts of the Chamber of Deputies and its related bodies also on the agenda.

Diane Adehm, a CSV MP serving as the budget rapporteur, highlighted key points from the debate. The government forecasts that national debt will rise to €22.2 billion by the end of 2024, representing 26.5% of GDP, with the pace of rising debt slowing down to 27.3% of GDP by 2027. Additionally, the amount the state spends on repaying current loans is expected to continue rising, from €125 million to €500 million in 2027.

Adehm emphasized the vital role of the financial sector in Luxembourg's economy, with over 64,000 people working directly or indirectly in banks, funds, and insurance companies, and an additional 135,000 jobs dependent on the financial sector. She stressed the need to further diversify the economy by focusing on the potential impact of technology, including investment in cybersecurity, innovative fintech legislation, and collaboration between the financial sector and higher education. Adehm also highlighted the importance of the space sector and the potential for building drones in Luxembourg as part of the government's efforts to diversify the economy.

Why this matters: The 2024 budget debates in Luxembourg underscore the country's efforts to maintain economic stability and growth while addressing the challenges posed by rising national debt. The emphasis on diversifying the economy through technology and sustainable finance initiatives reflects Luxembourg's commitment to adapting to the evolving global economic landscape.

During the budget debates, the Minister of Finance, Gilles Roth, announced a 10-point action plan for sustainable finance to develop Luxembourg's sustainable financial ecosystem over the next five years. The plan aims to position Luxembourg as a leader in sustainable finance and attract investment in environmentally and socially responsible projects.

The 2024 budget also includes plans to revert to the standard VAT rates of 17%, 14%, and 8% as of January 1, 2024, following a temporary reduction in VAT rates from January to December 2023. The super-reduced VAT rate of 3% will remain unchanged and applies to specific items such as food products, pharmaceuticals, books, magazines, newspapers, children's clothing and shoes, restaurant services, and passenger transport.

As the debates conclude, the Luxembourgish Parliament is set to vote on the 2024 budget and the multi-annual budget. The discussions have highlighted the government's focus on economic diversification, sustainable finance, and maintaining fiscal stability in the face of rising national debt. The Minister of Finance's presentation of the state's financial situation as of March 31, 2024, to parliamentary committees, along with the confirmation of Luxembourg's 'AAA' rating with a 'stable' outlook by Creditreform Rating, provide a foundation for the country's economic plans and projections for the upcoming year.

Key Takeaways

• Luxembourg debates 2024 budget, including multi-year budget and economic programs.
• National debt forecast to rise to 26.5% of GDP by 2024, slowing to 27.3% by 2027.
• Diversifying economy through technology, sustainable finance, and space sector initiatives.
• 10-point action plan to develop Luxembourg's sustainable finance ecosystem.
• VAT rates to revert to standard levels in 2024, with 3% rate maintained.