In an appearance on ETV's "Esimene stuudio" on Thursday night, former Bank of Estonia deputy governor and current Reform MP Andres Sutt said that if Jüri Ratas' governments had saved money from the state budget during the good times, then the state would already have a significant portion of the money set to be borrowed.
Thanks to the government's low debt burden, Estonia went into the coronavirus-induced economic crisis in a strong position, but according to Sutt, borrowing to stimulate the economy is now a forced choice.
"If we look at why we're at this point — crisis aside — then for the past three or four years, when the economy was at the top of the cycle, the government should have been in a surplus with its budget, but it was actually in a deficit," he said. "Nominally over €400 million, and if we're talking in terms of adjusted to the economic cycle, then over €1 billion. The money we need would have actually in large part been in the account today."
It is the current prime minister with his current and previous governments who must take responsibility for why this is the case, he added.
Sutt said that Ratas' governments haven't been capable of keeping its expenditures under control.
"The National Audit Office's report was highly critical regarding how the state calculates and monitors its revenues and expenditures," he said. "If the government lacks an overview of its expenditures, if this is not tracked, then it's fairly natural that expenditures get out of hand. If this kind of situation were to come up in the private sector, at a private business, the CEO and CFO would long since have been looking for new challenges on the job market already. The fact that we now have to borrow at these volumes is certainly also a 'favor' we can attribute to the fact that we weren't able to keep our budget in a surplus during the good times."
The MP noted that it is actually Estonian residents who will be repaying the government's loan.
"The state isn't abstract in this matter," he explained. "That is our — taxpayers' — joint debt, which we will ultimately repay. And actually we're not talking about €1 billion. If we look at the State Treasury's debts, then €2 billion has been taken, another will be added, making for a total of €3 billion. To give you even the slightest idea of what €3 billion means, then after borrowing this €1 billion, all Estonian residents are €2,300 in debt each to the rest of the world — from child to retiree."
Sutt stressed that if people and business-owners are expected to save during good times, then the same should be expected of the state as well. "Surely it's better to be minister of finance and also a citizen in a country where debt is low, not in a country where debt is high," he added.
Nonetheless, he also confirmed that members of the Reform parliamentary group are not fundamentally opposed to borrowing in a crisis situation.
The Estonian government announced on Tuesday that it intends to issue €1 billion in bonds with a maturity of ten years to be traded on the Irish Stock Exchange (ISE). In early May, the Ministry of Finance auctioned off €375 million in short-term, six- and 12-month bonds with negative interest rates. In late March, the Estonian state signed a 15-year loan agreement for €750 million with the Nordic Investment Bank (NIB) in order to help finance measures necessary to curb the impact of the coronavirus pandemic on the economic and society.
Editor: Aili Vahtla