Another state agency under scrutiny over loan issuing may face merger

Prime Minister Kaja Kallas (Reform) appearing on an episode of ETV politics show 'Esimene stuudio' recently.
Prime Minister Kaja Kallas (Reform) appearing on an episode of ETV politics show 'Esimene stuudio' recently. Source: ERR

Prime Minister Kaja Kallas (Reform) says that options are being investigated for merging a body dealing with issuing rural support funds with two other state agencies. Of the three currently separate organizations, two have faced allegations of irregularities in issuing loans and other support during the coronavirus pandemic.

The Rural Development Foundation (MES), which issues guarantees to banks for credit granted to farmers and other entrepreneurs in Estonian rural areas, and KredEx, which issues loans and guarantees may be merged together with innovation, trade, foreign investment and e-state investment body Enterprise Estonia, also known as the EAS.

The latter two fall under the economic affairs ministry's remit; the MES under the rural affairs ministry's area of governance.

"MES and Kredex have very similar directions, but at the moment we are moving forward faster with the merger of Kredex and Enterprise Estonia," Kallas said Thursday.

The government approved the schedule for merging KredEx and Enterprise Estonia around two weeks ago, with the goal being for full integration by the end of next year, and savings of around €144,000 expected.

"This looks to be easier because they are under the administration of one ministry, but we are also discussing these additional options," Kallas said Thursday.

KredEx came under scrutiny following a high-profile loan of nearly €40 million to an unfinished central Tallinn real estate development.

While questions had already been raised as to why a loan from a pot earmarked for support for businesses hit by the COVID-19 pandemic was being utilized for a project which was not yet generating revenue, once an ongoing investigation into corruption in the doling out of the loan and other favors for the project being linked to the Center Party became public, it prompted the resignation of Jüri Ratas (Center) as prime minister, and the collapse of the Center/EKRE/Isamaa coalition.

The National Audit Office (NAO) recently published a report in which it pointed to irregularities in the issuing of loans from a similar fund at the MES, which, the report said, saw millions loaned under the scheme to rural-related businesses not obviously hit by the pandemic and it effects, including even loans totaling €5 million given to enterprises which never even made the claim that they had been hit by the coronavirus pandemic and its ensuing restrictions and economic effects in the first place.


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Editor: Andrew Whyte

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