Finance Minister Vilius Sapoka told the Cabinet that 5 percent is "a limit that allows keeping debt growth under control and avoiding the growth of unsustainable debt service costs in the future".
The country's debt is projected at 50.2 percent of GDP in 2021, according to the bill.
The deficit is forecast to narrow to 2.7 percent of GDP in 2022 and to 1.6 percent in 2023.
Sapoka said the proposed medium-term plan should "ensure a rather low cost of loan financing".
"I believe the current version is optimal, even compared to other countries," the minister said.
"That allows us to return, in the medium term, to the implementation of the Maastricht criteria in terms of debt, inflation and budget deficit," he added.
This year, the general government deficit – the difference between expenditure and revenue – may reach 8.8 percent of GDP. The hole in the budget was caused by additional government spending to mitigate the negative effects of the coronavirus crisis and by a drop in revenue due to the economic contraction.
Despite an increase in public spending due to the coronavirus crisis, this year's budget has not been revised.
Sapoka told the Cabinet that next year's budget will be similar to what it actually is this year.