Banker: use budget surplus wisely, or else

  • 2004-06-17
  • Baltic News Service
TALLINN - Head of the Bank of Estonia Vahur Kraft said last week it was important that the government did not increase this year's planned spending through a supplementary budget.

Speaking at a press conference on June 9, Kraft said that since the government needed to dispose of the large budget surplus left over from last year, it was apparently seeking to do it with the help of a supplementary budget.
"Our position is that the budget surplus must be used in a thought-out manner, so that it doesn't increase expenditures," Kraft said.
The banker stressed that in times of economic development governments should accumulate reserves and that a continuation of the present budget policy would be conducive to meeting the EMU criteria for joining the euro zone. Therefore, it is reasonable that nearly half of the 1.1 billion kroon (70.3 million euro) supplementary budget be used to cover the state pension fund's shortfall in the coming periods, said Kraft.
However, there was still no clarity as far as how the rest of the money would be spent or distributed.
The vice governor of the central bank, Marten Ross, said this continued to be a problem.
The Bank of Estonia said that in a situation where there was a high current-account deficit and local government budgets were running a deficit, the government should avoid increasing expenditures and should instead seek to achieve a budget surplus.
In the opinion of central bankers there should be a surplus amounting to at least 0.1 percent of the budget per each percent of current account deficit and 0.2 percent for each percent over 7 percent.
The government was scheduled to tackle matters related to the supplementary budget last week, with the ruling coalition parties unanimous about the need to place extra funds in the pension reserve.