IMF questions Estonian indicators

In a meeting with Estonian government officials, the International Monetary Fund has voiced concerns over the country's large current-account deficit and advised the government to adhere to a conservative fiscal policy.

Richard Haas, deputy director of the IMF's second European department, met with Finance Minister Tonis Palts on April 30 to discuss Estonia's macroeconomic indicators.

One possible reason for the large current account deficit, which amounted to 12.5 percent of GDP last year, is increased consumption, and this can be curbed through tighter fiscal policies, Haas was reported by the Finance Ministry as saying.

Palts underlined that although the current account gap had been relatively wide for years, the problem did not pose a threat to the economy, since planned changes in the tax environment would foster a continued increase in direct foreign investment.

In the meeting with the IMF delegation, in Estonia to get acquainted with the new government's economic and financial policy goals, Palts gave a brief survey of the economic policy foundation of the coalition agreement, emphasizing a balanced budget, spending cuts and changes in personal income taxes.

The minister threw light also on the principles of this year's supplementary budget, making special mention of its being used to balance the state sectors and improve education, a priority for the new government, the ministry said.

At a meeting on May 2 with Prime Minister Juhan Parts, IMF officials advised the new government to stick to a conservative line in fiscal policy.

The delegation also stressed that cooperation between the fund and Estonia so far had been excellent, and the fund was ready to continue advising the country's new government, the prime minister's adviser Kristi Liiva said.