The general government sector in Estonia comprises three subsectors: the central government, local governments as well as social security funds. The central government subsector in turn includes state budget units, foundations and legal entities governed by public law, while the local government subsector includes city and municipal governments – together with their own subsidiary units – and foundations, according to a press release.

Pauline Kommer, government finance statistics team lead at Statistics Estonia, said that both the central government and local governments ended 2023 in deficit.

"The deficit was €1.3 billion for the central government and €170 million for local governments," Kommer specified.

General government revenues grew by 8.2 and expenditures by 14.5 percent on year in 2023, with expenditures exceeding revenues by €1.3 billion, resulting in a budget deficit last year of 3.4 percent of GDP.

The deficit had decreased in 2022, but swelled again last year in the central government and local governments. The larger deficit was due mainly to increased defense expenditures, however, labor costs went up as well, as did central government investments and expenditures on social benefits – primarily pensions and family benefits. Higher labor costs also meant increased revenue from labor taxes, which boosted government revenues.

Social security funds were the only subsector to end 2023 in surplus, with revenues exceeding expenditures by €181 million.

Estonia's general government consolidated debt – i.e. Maastricht debt – increased and amounted to €7.4 billion by the end of 2023, or 19.6 percent GDP. Both the central government and local governments contributed to this debt increase.

Regarding debt instruments, the biggest increase last year occurred in the volume of short-term and long-term debt securities, which were up by €171 million (49 percent) and €490 million (19 percent), respectively, on year. The level of long-term loan liabilities did not increase significantly, going up by €80 million, or 2 percent last year.

Compared with 2022, the general government debt to GDP ratio rose from 18.5 to 19.6 percent.

A closer look at debt level by subsector, meanwhile, reveals that the total debt of Estonia's central government grew by 11 percent on year, amounting to €7.5 billion by the end of 2023. The volume of debt securities increased the most, by 23 percent, as the government issued additional short-term treasury bills as well as raised the volume of 10-year government bonds issued in 2022 by €500 million.

At the end of last year, the volume of debt securities totaled €3.6 billion, up from €2.9 billion at the end of 2022. The volume of long-term loan liabilities decreased slightly, from €2.7 billion at the end of the previous year to €2.6 billion at the end of 2023.

Foreign debt, i.e. liabilities toward the rest of the world, accounted for 71 percent of the central government's loan liabilities. The central government's liabilities toward social security funds, meanwhile, increased to €1.3 billion.

Local governments' consolidated debt totaled €1.1 billion at the end of 2023, up by 15 percent on year. The greater consolidated debt was due to the 18 percent increase in long-term loan liabilities. The volume of long-term debt securities, meanwhile, continued to decrease, down by nearly one-fifth compared with 2022. The share of foreign debt remained steady on year at 27 percent of local government debt.

Social security funds – i.e. the Estonian Health Insurance Fund (EHIF) and the Estonian Unemployment Insurance Fund (EUIF) – did not contribute to last year's general government debt.

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