State Budget Drafted on 3 Percent Growth Scenario Passes
The 2012 state budget was passed in Parliament today by a vote of 55-44, with a 2.1 percent deficit that will be covered from reserves.
Planned revenue is 6.1 billion and expenditure is set at 6.6 billion euros, making the budget deficit a sizable 2.1 percent of GDP - a fact the Cabinet attributed to accounting reasons as investments of proceeds from carbon credit sales will show up only in this budget.
The other factor is that the government will resume payments into people's second pillar pension funds on the pre-crisis level.
The deficit will be covered from reserves, with the government pledging not to borrow money. The state has promised to begin increasing reserves in 2015.
Spending is 11 percent higher than it was in 2011. Besides the investments made from carbon credit sales, which accounted for a third of the increase, the government stuck to its promise to increase defense spending to 2 percent of GDP.
The alcohol excise duty will increase next year by 5 percent, which will increase budgetary revenue by 10 million euros. .
Tax revenue will increase and non-tax revenue will decrease in 2012.
Social sector spending will increase by 10 percent, and pensions will also grow 4.4 percent in addition to the expenses on the funded pension.
The government disregarded warnings from the central bank that the budget should be prepared based on a risk scenario of 1 percent economic growth next year. It put together the numbers based on the 3-percent growth scenario.
Finance Minister Jürgen Ligi said in Parliament in late October that he supported the more cautious approach, but the Cabinet turned this down.
Kristopher Rikken