The Estonian government on Tuesday approved a €802.9 million supplementary budget and related three bills, which will now be forwarded to the Riigikogu. The supplementary budget will be used to cover urgent expenses in connection with strengthening security, refugees from Ukraine, and Estonian residents getting by in crisis.
The government's supplementary budget decisions totaled €732 million in volume, to which tax implications and changes to tax revenue-dependent costs were added, as a result of which the total volume of expenditures, investments and financing operations will equal €802.9 million.
Combined with supplementary budget measures, the general government deficit for this year has reached €1.72 billion, or 5.3 percent of Estonia's GDP.
"The entire supplementary budget is tied to leveling the effects of the war Russia launched and is waging against Ukraine, and covering the resulting urgent needs," Minister of Finance Keit Pentus-Rosimannus (Reform) said according to a press release.
Prime Minister Kaja Kallas (Reform) said that this wartime supplementary budget will help the Estonian state and its people cope with the effects of the war in Ukraine.
€257.3 million from the supplementary budget has been earmarked for strengthening energy security, €247.6 million for strengthening security and resistance, and €242.7 million for initial expenses related to war refugees. Before the decision had been made to draw up a supplementary budget, the government had allocated funds from its reserves to the strengthening of Estonia's crisis preparedness. Part of the money from the supplementary budget will go to pay these funds back, increasing the government's reserve, together with money rolled over from last year's budget, to €100 million.
"Of energy security-related urgent decisions, and with the difficult fall and winter ahead in mind, we're establishing gas reserves for Estonia and investing in building LNG capacity," Pentus-Rosimannus said.
"In order to help people cope with difficult circumstances, we're increasing the [monthly] subsistence level from €150 to €200," she continued. "In connection with higher energy costs, we will be supporting two of the most vulnerable groups — families with children and pensioners — with one-off payments of €50 this November. We will be investing in defense capabilities, but also in civil defense. For example, early warning systems will be built in Estonia's largest 16 cities and towns. Also to be funded are needs related to the war refugees who have temporarily taken refuge in Estonia — including money to be allocated to the strengthening of the education system and to Estonian language instruction."
The supplementary budget accounts for nearly 2.2 percent of Estonia's 2022 GDP as based on the Ministry of Finance's spring forecast. The impact of the supplementary budget on the budgetary position is nonetheless somewhat smaller, as the use of subsidies will see the state get some of the money back in taxes. Taking both factors into consideration, the impact on the nominal general government budget position this year will be €627 million, or 1.9 percent of the GDP.
The state will have to finance measures with the help of its liquidity reserve as well as additional debt instruments. The issuance of short- and long-term bonds can be used as an instrument.
The supplementary budget's support measures and resulting negative cash flow will not increase the maximum permitted outstanding government debt of €7.2 billion.
Alongside the supplementary budget, the government also approved three related bills and submitted them to the Riigikogu.
The government approved and forwarded to the Riigikogu a bill of amendments to the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act which will reduce the excise duty rate on diesel fuel carrying a fiscal marker (EDK) to the minimum rate permitted in the EU, €21 per 1,000 liters, through the end of 2022. The current excise duty rate in Estonia is €100 per 1,000 liters.
EDK is permitted for use in agriculture and, for a limited period, in oil shale mining through April 30, 2023. EDK may also be used in professional fishing, in which case it is exempt from excise duties. Compared with April 2021, the wholesale price of EDK has jumped nearly 85 percent. As a result of the change, the wholesale price may decrease by up to 9.48 cents per liter, or up to 7 percent.
The government also approved and forwarded to the Riigikogu a bill of amendments to the Value Added Tax Act according to which the VAT rate on press publications will be reduced from 9 to 5 percent. This change will help improve the accessibility of independent, professional, quality Estonian journalism amid the information war being waged as part of the war in Ukraine.
The government likewise approved and forwarded to the Riigikogu a bill of amendments to the Social Welfare Act and the Health Services Organization Act. In changes slated to enter into force on July 1, it will be possible for people to include mortgage-related costs in calculations for subsistence benefits. Another amendment will allow pensioners who live alone to receive dedicated one-off benefits even if they are living together with a recipient of temporary protection.
Other amendments will serve to establish the legal basis for the adoption of measures in connection with the emergency situation caused by the mass influx of refugees or the treatment of people injured in the war.
Education to receive €77 million boost
A total of €77.2 million in additional funding from the supplementary budget will be allocated to the Ministry of Education and Research, €76.7 million of which is earmarked for expenses related to war refugees' education.
Minister of Education and Research Liina Kersna (Reform) said that with this additional money, the state is supporting the earning of an education, based on the understanding of an increase in Estonian language instruction and cooperation with extracurricular education and youth work.
A total of €16.3 million will be allocated to the creation of additional kindergarten spots at a cost of €465 per child per month. Funding will be based on the data of war refugee children from Ukraine registered in the Estonian Education Information System (EHIS). Per-child funding will cover teacher and other employee labor costs and necessary educational materials, among other costs.
Another €44.9 million is being allocated to the creation of additional spots in general education schools at a cost of €506 per schoolchild per month, with funding likewise based on the data of war refugee children registered in EHIS. Per-child funding will similarly cover teacher, principal and other employee labor costs, educational materials, school building maintenance costs, adjustment fees and language instruction-related expenses.
A total of €6.5 million will go to activities related to Estonian language instruction, which include both additional language immersion activities as well as various language learning camps. Schools and kindergartens are to be supported in providing Estonian-language instruction. Also planned for this summer are youth camps open to children from both Estonia and Ukraine aimed at supporting learning Estonian; joint camps will help foster friendships and cultivate the courage to communicate in Estonian.
Another €6.2 million will be allocated to creating additional spots in vocational schools at an estimated cost of €353 per student per month, which will cover teacher and other school employee labor and training costs, educational materials, school building maintenance costs, school lunch subsidies, study allowances and the financing of other activities supportive of learning. The actual allocation of funds to vocational schools will take curriculum costs and other necessary expenses into account.
€2.5 million has been earmarked for needs arising in higher education, with estimated operating costs of €5,000 per university student a year. This funding includes the reimbursement of paid tuition to universities, the creation of additional tuition-free spots, the offering of in-depth Estonian language instruction and, if necessary, the paying of scholarships.
Another €140,000 is to be allocated for additional training for Estonian language teachers of adult students. Plans include training for 200 Estonian language teachers at the University of Tartu and the awarding of Estonian language teacher microdegrees.
€250,000 has also been earmarked for the development of an online Keeleklikk language course that would describe Estonian grammar on the basis of and in relation to Ukrainian-speakers. Also to be included in planned development is a new Estonian-language scenario complete with a new script and visuals.
In addition to supporting war refugees, €500,000 from the supplementary budget is also slated to be directed to the strengthening of security and resistance by means of cybersecurity-boosting activities.
Editor: Aili Vahtla