Opposition leaders have said it is incomprehensible that the debt burden is planned to be increased in the state budget next year when forecasts show the economy will grow. In their view, the loan should be used for investments.
Speaking on ETV's evening news programme "Aktuaalne kaamera" on Tuesday leaders of the Reform and Social Democratic (SDE) parties said the forecast published by the Ministry of Finance on Monday predicts considerable economic growth in the coming years. The loan was taken out during the emergency situation caused by the coronavirus.
Chairman of the Reform Party Kaja Kallas: "If there is economic growth, there is no reason to quadruple the country's debt burden. If the minister of finance tries to claim this loan is taken to alleviate the economic crisis, the Ministry of Finance's forecast shows that there is no such crisis."
Chairman of the SDE Indrek Saar said the loan money should be invested. "If we look at how long and to what extent loans are planned [to be taken out], the question arises as to why they need to be taken out for so long and why it is necessary to place so much burden on future generations."
Kallas said the current plan is to increase current running expenses at the expense of the loan which is not the right thing to do. "We should definitely shrink the expenses of the state apparatus, look at where these savings are," she said.
Saar said fulfiling election promises are being prioritised over economic recovery.
One of the biggest potential costs would be an extraordinary pension increase, which the government is discussing. Prime Minister Jüri Ratas (Center) said on Tuesday he wants the next year's increase to cover the 1.4 percent inflation forecast.
Kallas said pensions increase by indexation, i.e. the best pension policy is a good economic policy. She believes improvement to the pension system should come from the tax side instead.
"We should start with the fact that the average pension should be exempt from income tax, because now the planned increase in the pension means that 20 percent of this pension will be taken away from many who go beyond this income tax minimum," said Kallas.
In Estonia, income tax applies on salaries or earnings over €500 per month. The average pension in Estonia in 2020 is approximately €531 per month. Last year it rose by €39 due to indexation and the government agreed an extraordinary €7 increase.
Editor: Helen Wright