The city of Tallinn last week signed an unsecured 20 million euro loan agreement with Nordic Investment Bank, the first of its kind in the Baltic states.
The five-year loan with an interest rate of Euribor plus 0.41 percent will cover expenses related to education, social housing municipal services and road construction.
The loan, which is slated in Tallinn's 2003 annual budget, did not need the guarantee of the federal government in order to be processed, which is normally the practice when dealing with nonsovereign entities.
Tallinn's credit rating was recently upgraded by Moody's to A3, which enabled it to receive the loan on such favorable terms.
None of the five Estonian banks which participated in the tender qualified.
The Nordic Investment Bank, a financial institution owned by the five Nordic countries, finances major private and public projects with a high priority and profile for the Scandinavian region. The bank has issued a total of 250 million euros in outstanding loans to Estonian entities.
In addition to the 20 million euro loan Tallinn also borrowed 10 million euros from Nordea Bank last week.
In accordance with the budget strategy approved by the City Council last year, Tallinn can borrow up to 465 million kroons in 2003 to cover investment expenditures.
According to Ahti Kallaste, director of the finance department of the Tallinn city chancellery, budget revenues in the first four months of 2003 exceeded 1.24 billion kroons (79.23 millioneuros), or 27 percent of the planned 2003 revenues.
The tax revenue share has increased by 21.4 million kroons compared with 2002.
City expenditures from January to May 2003 amounted to 1.37 billion kroons, or 28 percent of the planned expenditures.
In order to meet its costs, the city had to use 8.2 million kroons from the reserve fund that currently holds 31.8 million kroons.