Luxembourg Finance Minister Briefs Parliament on State Finances Amid 2024 Budget Debate

Luxembourg Finance Minister Gilles Roth informed the Chamber of Deputies about the evolution of state finances during a budget marathon on April 25, 2024. Roth presented the state's financial situation as of March 31, 2024 to members of the Finance Committee and the Parliamentary Committee for controlling budget implementation.

The finance minister's update comes after the rating agency Creditreform Rating confirmed Luxembourg's 'AAA' rating with a 'stable' outlook on April 20, 2024. Despite Luxembourg expected to have entered recession in 2023, private household consumption and public spending were strong enough to maintain domestic demand, according to the Luxembourg industry federation, Fedil.

With the 2024 budget set to dominate debate in parliament this week, Roth revealed that government income increased 9.4% in the first three months of the year. However, national debt is forecast to rise to €22.2 billion by the end of 2024, representing 26.5% of GDP. The pace of rising debt will slow down to 27.3% of GDP by 2027, still below the previously set 30% threshold.

The amount the state spends on repaying current loans will continue to rise, from €125 million to €500 million in 2027. Roth defended measures to stimulate the housing market and announced plans for a housing roundtable. He also issued a formal commitment to relieve taxpayers in class 1A (mostly divorced or widowed people) over the next year.

Why this matters: Luxembourg's financial sector is vital to its 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. The government is considering investing in fintech legislation, the space sector, and the development of drones to further diversify the economy.

Measures to cushion the rise in energy prices, including the price cap, will expire in 2025, as per demands from the EU Commission and the European Central Bank. Roth proposed a 'debt brake' where the state could only spend as much as it recouped from taxes or other revenues, as a matter of responsibility. The central government's budget deficit is not as high as anticipated earlier this year, due to increased state revenue and lower expenses.

Key Takeaways

• Luxembourg's finance minister reported state finances as of March 2024.
• Luxembourg's 'AAA' credit rating was confirmed with a 'stable' outlook.
• Government income increased 9.4% in Q1 2024, but debt to rise to 26.5% of GDP.
• Measures to stimulate housing market and relieve taxpayers in class 1A.
• Govt considering fintech, space, and drone legislation to diversify economy.