The government will borrow €250 million to cover the cost of next year's budget and for the following four years. Estonia's debt burden will raise from 19 percent to 26 percent by the end of 2026.
The new budget will be approved next week, Prime Minister Kaja Kallas (Reform) said on Thursday. National defense and security are its priorities and spending in these areas will rise to 1 billion for the first time.
The second priority is investing in people by which the coalition means energy subsidies and raising salaries. This will total €350 million.
Expenditures are clearly above revenues, Thursday's "Aktuaalne kaamera" reported.
"We remain in a structural deficit of 2.6 percent, which is better than we have had before. Yes, we cannot balance revenues and expenses, we have a real crisis situation and we must take out a loan to cover these expenses," Kallas said.
Chairman of the junior coalition partner the Social Democratic Party Lauri Läänemets said loans are needed to cover defense spending.
"The available money in the budget is going to people's salaries, which is very important at the moment, and the state has to borrow for national defense spending. According to my knowledge, this amount is at least €1 billion over four years, if not more," said Läänemets
Minister of Finance Keit Pentus-Rosimannus (Reform) said the government knows it needs.
"In the coming years, the loan will grow in the same way. It is related to investments but it is also related to the fact that base expenses for the next four years will remain at the same level as now because expenses and income will note balanced for the next four years," she said.
Editor: Helen Wright