Macroeconomic Adjustment and the Economic Transition in Agriculture: The Case of Lithuania

Experiences in transition economies have shown that the simultaneity of macroeconomic and sectoral reforms is important to the success of both. In Lithuania, macroeconomic, agrarian, and other sectoral reforms were implemented concurrently. Real wages and income have declined sharply, inflation has been reduced to low single digit levels, the real exchange rate has appreciated substantially and stabilized, and the real value of foreign trade and trade dependence in the East has fallen substantially. Restructuring and privatization of state and collective farms has been progressing rapidly, and the privatization of other enterprises in the food and agricultural chain has been going at a slower pace. Input prices and retail prices have increased in real terms while real product prices have declined. The food and agricultural sector has contracted and in a market economy will likely remain far less dependant on imported inputs and on export markets for products.