Minister of Infrastructure Vladimir Svet has written to the Ministry of Finance seeking approval to increase Estonian Railways' net debt burden for the years 2024-2028 beyond the limits set by the State Budget Act.

According to forecasts, the rail company's net debt burden will account for nearly 90 percent of its operating revenue this year. By next year, it is expected to rise to 120 percent and continue growing, reaching 229 percent of Estonian Railways' operating revenue by 2028.

"The reason for exceeding the net debt threshold is the loans taken for railway infrastructure projects," Svet explained.

Estonian Railways' operations have a direct impact on government financial indicators. Margus Täht, a senior analyst in the Ministry of Finance's fiscal policy department, told ERR that since 2019, Statistics Estonia has classified Estonian Railways as part of the general government sector.

"This means that all of their activities now affect the government sector's financial metrics. The loans they have taken on increase the debt burden," Täht confirmed, adding that the primary impact on budget balance comes from investments.

According to Svet, many railway infrastructure projects are funded through the European Union's Connecting Europe Facility (CEF) and CO2 trading funds. However, loans have been necessary for some projects. As of the end of last year, Estonian Railways had obligations amounting to €74.4 million, including €50 million owed to the European Investment Bank (EIB).

The total value of the loan agreement with the EIB is €113.5 million, and the final tranche will be disbursed next year. With the help of loan funding, Estonian Railways is upgrading security systems across its infrastructure and automating traffic management – tasks that are included in the owner's expectations for the company.

"In addition to the existing loan limit, an additional investment loan of €70 million will be needed for 2026-2028, and the company has already initiated pre-consultations with the EIB. Without this funding, the planned updates to security systems on the Ülemiste-Aegviidu section and at Muuga and Maardu stations would not be completed," Svet highlighted.

Specifically, €20.98 million in loan funding is required for investments in the Ülemiste-Aegviidu section and Muuga and Maardu stations, €11.83 million for railway infrastructure buildings, €25.13 million for a new traffic control center – including Rail Baltica traffic management – and €13 million for track lifting and maintenance work.

Svet also noted that without additional loan funding, the electrification project would remain unfinished, and it would be impossible to achieve the goal of 160 kilometers per hour for passenger trains.

"If the loan is not granted, Estonian Railways' investment capacity will be exhausted by 2026, and even standard investments, such as track maintenance and routine repairs of railway facilities (bridges, culverts, platforms, crossings and footbridges), will not be completed. This would have a direct impact on the continuity and safety of railway operations, leading to reduced train speeds," the minister outlined, emphasizing the necessity of loan funding.

The Ministry of Finance has until October 23 to issue a decision on Svet's request.

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