Finance minister: Estonia to get a long-term interests budget

Keit Pentus-Rosimannus speaking at a press conference, October 13 2021.
Keit Pentus-Rosimannus speaking at a press conference, October 13 2021. Source: Jürgen Randma/Government Office

The 2022 state budget will not solve all of Estonia's long-term needs right away, while it will be a notable step in the direction of rendering the future of people in Estonia more secure, Keit Pentus-Rosimannus writes.

The Riigikogu is set to open the debate concerning the most important fiscal document of next year. What will it entail? The 2022 state budget will alleviate still considerable crisis pains, while it mostly concentrates on Estonia's long-term interests. How so?

Estonia's long-term interest is a self-sufficient and happy people realizing its dreams peacefully and in democratic spirit. Happiness cannot be found in money, while a solid income gives every person and family peace of mind and satisfaction.

It is in Estonia's long-term interests for our average salary to reach the top in the EU and for average old-age pension to make up at least 40 percent of average salary. Salaries of teachers will grow by 7.3 percent, those of doctors and nurses by 8 percent. The minimum salary of culture workers will grow by 7.5 percent, that of rescuers by 12 percent and 5 percent for police officers and Alarm Center rescue leaders. Pensions will grow by up to 8 percent.

Estonia among winners in economic competition

Estonia's long-term interest is being among the winners in economic competition. To be a high-value-added participant in international work allocation. The world economy is going through a green and digital revolution. Our success and ability to get on board early on will come to affect Estonians' salaries and pensions in the coming years.

For this reason – a more secure future for our people – we will be investing €190 million of next period European subsidies in the green and digital turns. Looking to the future, Estonia will contribute €2.2 billion in EU aid to the green and digital turns in the coming years. I would also take this chance to thank the previous government for introducing the plan.

Higher productivity is another long-term interest of Estonia. People's salaries and pensions, increased prosperity depend on it. Boosting productivity is impossible without scientific innovation, without a smart and knowledge-based enterprise. That is why we will be investing 1 percent of GDP or €324 million in research and development next year.

Estonian education plan to be funded

Estonia's long-term interests also include a varied yet united society where segregation has no place, including in the field of education. Every Estonian resident must be able to share in the high quality of education our universities have to offer and have the chance to find gainful employment – a universal Estonian education system is a prerequisite.

The parliament is set to discuss the Estonian education activity plan in the coming months. We have earmarked €5 million for these activities in the government reserve next year. This will be complemented by €8 million in the budget of the Ministry of Education and Research and €2.4 million in that of the Ministry of Culture. We are investing in switching to universal Estonian education in the interests of Estonians of other nationalities, their opportunities, income and happiness.

Record national defense investments

National security is a long-term interest. To make sure Estonians would not have to worry about their country's independence and future, we will invest 2.3 percent of GDP or close to a record €750 million in national defense, boosting Estonia's deterrence capacity. It will help us fill gaps in military capabilities faster and bolster national security.

The year 2022 will see anti-ship missiles, large-caliber munitions, wheeled vehicles, additional self-propelled artillery and Scouts Battalion IFV refit tenders. Extensive infrastructure developments, such as ammunition warehouses, training infrastructure, national defense building, military and disaster medicine center and battle school, will continue.

A total of around €202 million is planned for defensive special equipment procurements in which investments – in weapons systems and transport – come to €127.2 million and operating costs – such as munitions and protective equipment – €74.6 million.

Our culture enduring and its transmission is a long-term interest of Estonia. In addition to the spirit of Estonianness, culture also directly support the economy. The role of cultural and creative economy is becoming increasingly fundamental in Estonia. Every euro invested in culture on average brings back five.

One example of this is the Estonian film industry that has helped make the country bigger in the world. Only about a third of a movie's budget is spent on the actual movie. The rest of it lands in all manner of sectors, from catering to design. Permanent film production funding will grow to €7 million a year in 2022.

Financial dignity in long-term interests

The state's financial coping in good and bad times, without the need for foreign aid and policy choices dictated by debt is another aspect. Fiscal dignity is in Estonia's long-term interests.

It is in Estonia's interests to make sure existing and deepening demographic changes do not result in higher tax burden that would suffocate our people's enterprising spirit and our middle class' – teachers, doctors and engineers – hope for a better life.

So that tax pressure would not become intolerable on the dwindling working-age population, we inevitably need to keep state spending in check and modernize 30 years of layer upon layer of state apparatus.

For these goals, in the name of independence and low taxes but also to avoid additional price advance and overheating, we will keep expenses in check and reduce fiscal deficit a sensible level in the current fiscal situation.

I have been surprised to hear serious claims according to which economic growth and improved tax receipt will automatically solve fiscal problems and deficit. No. They will not. Expenses and requests for funding are the only things that grow by themselves.

Keeping costs in check requires politicians to make choices. It requires effort. Doubly so in the conditions of economic growth. The cabinet has kept these things in mind putting together the 2022 state budget.

State budget proceeds will grow by 17 percent. Costs by 3 percent. We will reduce 2022 fiscal deficit that was still forecast at 4.9 percent last year to 2.6 percent. An improvement of €739 million.

Yes, it is still a long road before we can balance costs and income in the state budget again, while the 2022 budget takes a long step in the right direction with your help.

The short-term problem of Estonia and the world is the coronavirus crisis. We will be contributing over €150 million toward overcoming it and mending the damage done next year. Of that money, €12 million will be spent on mending gaps in education caused by schools closing and opening, €38.3 million on vaccination, €19.6 million on testing. We will for the first time be allocating €3 million from the budget for systematically addressing mental health topics.

The 2022 budget will not solve all of Estonia's long-term needs, while it will take a notable €13.6 billion step toward securing Estonians' future outlook.


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Editor: Marcus Turovski

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