Estonian PM on state budget: People don't get why we must make an effort

Neither the public nor the press nor the opposition understand why it's necessary to make the effort to reconcile the state budget's revenues and expenditures, Prime Minister Kaja Kallas (Reform) said in an appearance on Vikerraadio's "Stuudios on peaminister" Tuesday, noting that adopted tax decisions should improve Estonia's budget situation.
According to the Ministry of Finance's spring forecast, Estonia is facing a general government sector deficit this year of 3.5 percent. Of the €17 billion 2024 state budget, Estonia is currently short €1.3 billion. In 2025, the budget deficit is projected to reach 5.3 percent, or €2.2 billion.
Host Mirko Ojakivi asked Kallas why the Reform Party is moving in the opposite direction from its promise of getting the state budget in order and has begun growing Estonia's loan burden.
"But it's not moving in the opposite direction," replied Kallas, chair of the senior coalition Reform Party. "We are constantly making these efforts to ensure that all the tax decisions and spending cut decisions we've made – the IMF likewise says – that these decisions have been going in the right direction. It is true that the situation is still really bad, and that difficult decisions will have to be made in the future as well."
Cohost Arp Müller asked whether the prime minister is willing to take responsibility if the IMF delegation should ever in the future start making budgetary decisions for Estonia.
"I have sensed my responsibility, and repented in dust and ashes, for all sorts of things," Kallas said. "But there are folks who are just flowering about here that have been running up this deficit for years, and no one is asking them about their responsibility. I didn't cause this deficit. This deficit has accumulated over the years."
The head of government noted that she has admitted and will admit it again that some decisions by her cabinets – which they have also attempted to reverse – have contributed to this deficit as well.
"But I'm truly asking that others acknowledge this mistake too and do the headwork with me," she added.
"It seems to me as though neither the public nor the press nor the opposition in particular actually understand that we need these efforts to ensure that the IMF delegation doesn't arrive and start saying 'You're going to sell this off, you're going to hike that tax, you're going to cancel this,'" Kallas said.
Passing the car tax, increasing state fees, increasing fine rates as well as freezing the income tax exemption on average pensions will help improve the budget situation, she added.
Ojakivi then asked her why the Reform Party wants to ignore the introduction of the broad-based security tax outlined in the Finance Ministry's budget strategy, which was also likewise recommended by the IMF representative that had just visited Estonia.
"Once again it's like this is only a Reform Party issue; like everyone else isn't responsible for anything in the state," Kallas commented. "But I am prepared to bear that responsibility. Truly all parties see the Reform Party as the only adult who has to make the hard decisions; everyone else can put forward the popular ideas."
Feedback from society has been that it is no longer willing to accept more tax increases, and so plans must be made for spending cuts, she explained, but went on to acknowledge that there's no escaping borrowing either.
"We'll be taking out a loan regardless," the prime minister explained. "The revenues and expenditures don't add up – that's the reason. That's why we need for revenues and expenditures to add up, and for that we have to make these difficult decisions."
Kallas criticized the press for asking about deficit-reducing decisions before August.
"No, we have to make the decisions by August," she emphasized. "We're having meetings every month in order to get there."
The Estonian head of government noted that the state's 4 percent deficit has resulted from increased social benefits, including family benefits and pensions, COVID-induced healthcare costs, increasing defense spending as well as the cost of interest payments.
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Editor: Aleksander Krjukov, Aili Vahtla