Ratas: Budget position improvement starts 2022, credit not long-term plan

Jüri Ratas on Tuesday's
Jüri Ratas on Tuesday's "Aktuaalne kaamera". Source: ERR

With its state budget for 2021 agreed on Tuesday, the government will start to improve its structural position in the state budget from the following year, 2022, Prime Minister Jüri Ratas (Center) said Tuesday evening.

Ratas also said that living on credit cannot go on indefinitely, speaking to ETV news show "Aktuaalne kaamera" Tuesday night, in an interview which follows.

You said via a government press release that you have drawn up a budget which will help overcome the coronavirus crisis Isn't this quite ambitious and confident, given that no one knows what will happen next, how the crisis may develop and what will happen with the economy?

Yes, there is still a great deal of uncertainty, and the financial forecasts that the Ministry of Finance issued at the beginning of this month, compared with the Bank of Estonia's forecast a few weeks later, are ten times different from each other. I think COVID-19 can be overcome once a vaccine is developed. But we must be prepared ourselves accordingly. And we are certainly in better shape to do that with next year's budget than this year's, given the investments which are being made in hospitals and the expenditure going on COVID-19 to ensure that the various items are still available in stock.

Given the scale of, and gaps in knowledge about, the crisis, is it still the right time to deliver costly election promises using the help of credit?

As of now the whole of Europe, and in fact most of the world, is actually delivering with the help of debt. The other route that could be chosen would have been a very hard path of cuts.

Did you consider cuts at all? Was an austerity budget on the table at all, with the cabinet?

If we are talking about economic costs, for example, then next year it will be the responsibility of the ministries to save, and invest this money in their IT developments. But when it comes to large spending figures in terms of the budget, defense investment has always been the largest component. For the first time, the share of research and development (R&D) has reached one percent, and this is a constant through the state budget strategy.

You acknowledge that loan money also covers current expenses, yet it is not sustainable. Raul Eamets, budget council chair, also makes reference to this. What is your plan for the coming years? Will you continue to take out a loan to cover your ongoing expenses, on an ongoing basis?

When it comes to loan money, this can be done for a certain short period of time, but it cannot be a long-term endeavor. If we take a look at the state budget strategy, then in fact, in 2022, 2023 and 2024, we will improve the budget's structural position If we also look at our debt burden at the end of next year, for example, which will be in the order of 24 percent, it is safe to say that it will still be the lowest in the EU.

Borrowing accounts for a significant share of the budget. Doesn't it make you hesitant, thinking about the future, that someone will have to pay it back?

Today, we need to bear in mind that we need to deliver as soon as possible in order to get out of this very deep economic crisis. We need to do this quickly today to get out of the health crisis. I think it is very true that at this point in time, we are also carrying out these activities via loan money.

Does the knowledge that your government does not have to repay this loan also make borrowing easier?

As for the mystification of this loan percentage, as of today the average loan level in the EU is around 80 percent; I am pretty sure that by the end of next year it will be between 90 percent then 100 percent. Estonia's loan percentage on the other hand will next year be in the order of 23.5-24 percent.

R&D funding is one percent of GDP. Do you know exactly where this money will be allocated? Is it specifically for the development of science in universities, faculties, researchers, and not somewhere in business?

I think this is a historic step. If you ask the universities, there are separate funds for the universities. It is an agreement between the government and the universities, and the amount is €7.8 million. R&D always goes hand-in-hand with innovation and entrepreneurship, and this division is very clearly 40 per cent for the Ministry of Education and Research, 40 per cent to innovation and entrepreneurship and 20 per cent towards other ministries such as the Ministry of the Environment, the Ministry of Rural Affairs and the Ministry of Culture.


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Editor: Andrew Whyte

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