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Estonian government endorses allowing state budget to go into deficit

Prime Minister Jüri Ratas (center) led the first meeting of Estonia's 49th cabinet on Thursday. Nov. 24, 2016.
Prime Minister Jüri Ratas (center) led the first meeting of Estonia's 49th cabinet on Thursday. Nov. 24, 2016. Source: (Siim Lõvi/ERR)

During Wednesday's Cabinet meeting, the Estonian government endorsed changes to the State Budget Act, according to which drawing up budgets with a temporary structural deficit of 0.5 percent of GDP annually would be allowed in the future.

According to the new rules, the structural balance of the state budget would be tracked as an average of a longer period, the Ministry of Finance said. The new rule would provide the opportunity of using the structural surplus of previous years for up to 0.5 percent of the GDP.

The current rule, according to which, if a budgetary year has a bigger deficit than allowed, the following years' budgets should have a surplus to compensate for the deficit, would stand.

They want to refrain from the government having a negative effect on the economy with its decisions, Minister of Finance Sven Sester said. "We want to have a balanced fiscal policy which would allow for making investments directed at the future, but at the same time, it would oblige covering the deficit in the following years with a surplus," he added.

In recent years, the government sector's budget has been in surplus. The changes would affect the 2018 budget as well as budgets of the following years.

The new budgetary rule is incompliance with European budgetary rules.

The government also supported the proposal according to which, as of 2020, the state budget would include the impact of previous and new decisions in a four-year, not one-year, perspective.

The Bank of Estonia as well as the opposition have criticized the decision to allow a deficit in the state budget.

Editor: Aili Vahtla

Source: BNS

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