Rõivas: Estonia doesn’t need to issue bonds (1)
Estonia could make all necessary investments without needing to borrow money by means of issuing government bonds, Prime Minister Taavi Rõivas said on Wednesday.
“The government is indeed planning to make investments in infrastructure, for instance we’ve allocated €200m for Rail Baltic to become a reality,” Roivas said, answering MPs’ questions in the Riigikogu on Wednesday.
Estonia is investing €200m in a new electric power interconnection with Latvia, as well as another €200m in the construction of a gas pipeline to Finland. Another large project is the extension of the Kose-Mäo section of the Tallinn-Tartu highway to four lanes.
The Estonian government previously financed gaps in the budget by different means, mostly using loans, which it sees as a cheaper option than bonds. Considering the small size of the Estonian economy and the small volume that a bond issue would inevitably have, the accompanying technical costs may prove disproportionately high.
The government’s large-scale investments are also supported by EU structural fund payments, which for the current period amount to some €3.5bn.
“All these years, 2014, 2015, and according to estimates also 2016, the Estonian state budget has achieved a small surplus," Rõivas pointed out. No large project was behind in terms of funding. On the contrary, there were design bottlenecks rather than money issues.
The prime minister also pointed out that Estonia invests significantly more than its neighbors, both measured as a ratio to the state budget as well as to GDP.