IMF: Investment management in Estonian public sector efficient

The protection money (Estonian: Katuseraha) component of the state budget has come in for some criticism, in particular from the Reform Party. Others say that it is simply the icing on the cake and not the main event (picture is illustrative).
The protection money (Estonian: Katuseraha) component of the state budget has come in for some criticism, in particular from the Reform Party. Others say that it is simply the icing on the cake and not the main event (picture is illustrative). Source: (Marco Verch/Wikimedia Commons)

Investment management in Estonia's public sector is generally efficient and on a good level worldwide, the Ministry of Finance said on Thursday, citing the initial results of an International Monetary Fund (IMF) mission that spent two weeks in Estonia.

The IMF mission, which was in Estonia at the invitation of the Ministry of Finance, introduced initial suggestions regarding the planning and carrying out of public sector investments in Estonia.

"I am glad that the initial assessment of the International Monetary Fund mission regarding the management of public sector investments in Estonia is generally positive," Minister of Finance Toomas Tõniste (Pro Patria) said in a press release. "We are best among the countries assessed so far in terms of several indicators. Nevertheless, we must seek and find ways to ensure that the public sector could even more efficiently select and realise investments. We have to use the money with which we have been entrusted in such a way that it most benefits society."

According to Tõniste, the IMF's advice was very valuable. "We want Estonia's public sector to be the best in the world," he said. "Advice from experts with extensive international experience is very useful in maintaining and improving the standard."

The IMF said that according to the studies thus far, Estonia in its category is already among the countries with the most efficient and strongest institutions, but the mission will result in more specific recommendations for the more efficient management of investments that will be concluded at the beginning of 2019. Involved in the carrying out of the analysis are experts from the Ministry of Finance, IMF and the World Bank, as well as the Fiscal Council, National Audit Office, several ministries and their divisions.

"We share the stance of the IMF's experts that the state requires a central long-term development strategy along with an agreement regarding the more important investments," said Secretary-General of the Ministry of Finance Veiko Tali. "It is namely for this reason that we have launched the compilation of the government's long-term strategy 'Estonia 2035,' in cooperation with the Government Office."

Cooperation, management, rated highly

According to the mission, there is a strong and well-functioning fiscal framework and state budget strategy in Estonia. Cooperation between institutions functions well, and when it comes to investments, maintenance expenses are taken into consideration. In addition, the organisation of public procurements and the management of the state's cash flows, implementation of projects and monitoring and management of the state's assets are at a very good level.

At the recommendation of the IMF, some efficiently functioning processes should be formalised in legal acts, thus imposing some of the currently functioning practices as legally binding requirements. For example, when it comes to funding, the practice is to prefer projects already underway before allocating money to new ones, but this could be clearly provided in legal acts as well.

In addition, public sector investment projects could be managed as a single, integrated portfolio. The IMF mission recommended implementing a plan for larger investments with a perspective of 10 years so that large investments could be prepared for and assessed systematically in the planning stage. All projects should go through standardised assessment so that when compiling budgets and during the decision-making stage regarding the funding of projects, decision-makers could pick the most efficient and cost-effective investments from a list of projects that have undergone standardised assessment.

The IMF technical aid mission was led by Christiane Roehler of the IMF's Fiscal Affairs Department and included Ashni Singh, Willie du Preez, consultant Eivind Tandberg, who previously worked at the IMF, World Bank and the management of the Norwegian Ministry of Finance, and World Bank representatives Jonas Arp Fallov and Carmen Calin Elena.

The mission relies on IMF methodology developed after the financial crisis aimed at helping countries make their public sector investments more efficient. In the framework of the assessment, the planning of sustainable investments in the public sector, the distribution of investments between sectors and projects and the implementation of projects are analysed.

Government sector investments will make up 6% of the Estonia's GDP in the next few years, which is one of the highest rates in the EU. Government sector investments totalling €3.9 billion have been planned for 2019-2022.

Each year, approximately one tenth of the Estonian state budget is planned for investments. Altogether €988 million in investments have been planned in the 2019 state budget adopted by the Riigikogu on Wednesday.

With the help of investments, the government among other things is to develop the future school network, establish roads and bridges, create new IT solutions and promote entrepreneurship. Investments help promote economic activity and solve significant societal problems. In the long view, investments into education, healthcare and research will help raise Estonia's standard of living.


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Editor: Aili Vahtla

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