Estonian government endorses allowing state budget to go into deficit

  • 2017-04-05
  • BNS/TBT Staff

TALLINN – The Estonian government during Wednesday's Cabinet meeting endorsed changes to the State Budget Act, according to which in the future drawing up budgets with a temporary structural deficit of 0.5 percent of gross domestic product per year is allowed.

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 will provide the opportunity of using structural surplus of previous years for up to 0.5 percent of GDP. The present 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.

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

In recent years the government sector's budget has been in surplus. The new budgetary rule is in compliance with the European budgetary rules.

The changes would affect the 2018 budget as well as budgets of the following years.

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 the perspective of four years, instead of just one.

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