Estonian PM: State budget's focus is on security, supporting the population

TALLINN – Delivering a political statement on the occasion of the submission of  the 2023 state budget bill to the Riigikogu on Thursday, Estonian Prime Minister Kaja Kallas said that next year's state budget is good and ensures that the Estonian state and people are protected and taken care of.

The prime minister began her speech by saying that Russia is waging an energy war with all of Europe and the world in the hope that the energy crisis will make voters and leaders in democratic countries question the necessity of helping Ukraine.

"We can be quite sure of one thing -- if Ukraine falls, the whole of Europe will be at risk," Kallas said. She said the government must work in such a way that there is money to ensure our own security, to support the population and also to help Ukraine.

The premier said that while Estonia has been very successful, we must also take into account that there will be occasional setbacks in our lives and success. At present, the whole world has suffered a setback and Estonia is in no way separate from this world.

"We cannot set ourselves apart from the rest of the world and imagine that our worries would be lessened if we left the European Union, NATO or, say, the power exchange. On the contrary -- together we can overcome also the current setback, alone we would be easy prey for our aggressive neighbor," said the prime minister.

Kallas pointed out that the revenue of Estonia's 2023 state budget totals 16 billion euros, which is 16 percent more than the 2022 state budget, inclusive of the supplementary budget. Expenses amount to 17 billion euros, which is 18 percent more than this year. The state will make investments worth 775 million euros, which is approximately 30 million euros more than this year.

She said the government based the state budget for 2023 on two major priorities: first, that the security of the Estonian state and people is guaranteed, and second, that our people are protected and taken care of.

In 2023, Estonia's annual defense spending will for the first time cross the one billion euro mark, which equals 2.82 percent of GDP. Defense spending in 2023 will be more than 41 percent higher than in 2022, Kallas said, highlighting the government's decision to develop medium-range air defense as very important.

"As a small but digitally conscious country, we will invest an additional more than 30 million euros in cyber security. Russian-led cyber attacks on our systems have become significantly more frequent and to stay strong in the cyber-war, we need to fund this domain in a sustainable way," she said.

"The second important priority in the 2023 budget is the coping of our people amid the energy war unleashed by Russia," the premier said, pointing out that 230 million euros has been earmarked in the 2023 budget for salary increases. Across the public sector, the increase in the payroll will be 5 percent, costing altogether 60 million euros.

Starting from the new year, the average old-age pension will be exempted from income tax. Together with the extraordinary pension increase and indexation, the average old-age pension will rise to 704 euros per month. In addition, family allowances for large families will increase by 50 percent, child allowances for a family's first and second child by 30 percent, and the single parent's child allowance by 417 percent, or more than fourfold.

The budget for family allowances will increase by a total of 163 million euros in 2023.

"The increase in the basic exemption to 654 euros a month, which will enter into force on January 1, will also be an important help for families," Kallas said.

The reform of long-term care, with a budget of 40 million euros in 2023, is nearing completion. In addition, the government will pay 100 million euros in subsidies to help people cope with energy prices during the heating season.

The prime minister also highlighted the transition to Estonian-language schooling in preschool  and primary school and the financing of higher education.

She said the the budget deficit left to us by the peacetime government that governed before the previous government has been decreasing at a good pace.

"In the new year, the structural deficit of the budget will be 2.6 percent, which is 0.8 percentage point less than we envisaged in last year's state budget strategy. Improving fiscal discipline is the financial gunpowder we may need should things develop in a more negative way than expected," the prime minister added.