Estonia may ask for loan

  • 2009-01-15
  • TBT Staff in cooperation with BNS
TALLINN - The Estonian Finance Ministry has reportedly begun negotiations with international finance institutions over the possibility of taking a loan to help ease the worsening economic situation in the country.

Finance Minister Ivari Padar told journalists after agovernment press conference on Thursday that negotiations with one institution are ongoing. He refused to name the institution, but said that it was not the International Monetary Fund.

Shortly after the end of the press conference Padarclarified his remarks through spokespeople.

"The Finance Ministry has not started formal negotiations as regards taking a loan. We have as part of our normal work had meetings with different banks and international financial institutions, at which the possibilities and terms of getting a loan have been discussed among other topics. These have not been specifically negotiations on borrowing, which is why there is nothing more to be added on this topic," the minister said.

Padar said in his remarks to reporters that the contraction in tax receipts at the end of 2008 increased the danger that the deficit in this year's budget could exceed the limit of 3 percent of GDP, which must not happen if Estoniawishes to qualify for eurozone membership.

Judging by what the ministry knows at this point the size of the gap this year might be from 5 to 6 billion kroons (0.32-0.38 million euros), despite the cuts made in thecourse of the budget drafting process in late 2008, Padar said.

Padar said it was important to remember that possibleborrowing would not mean that additional money was added to the state budget, but it would offer additional possibilities to manage cash flows. The loan will not replace the forthcoming vital cuts in the state budget, he said.