Riigikogu passed the 2012 state budget

Today, the Riigikogu approved the 2012 state budget, in which the forecasted revenue is 6.12 billion euros and the planned expenditure 6.58 billion euros. The budget is based on responsible and conservative budget policy — without taking into account the non-recurrent effects and effects of the economic cycle, the next year’s expected general government budget is continually in surplus; nominally, the deficit amounts to 2.1 per cent of the GDP.
The greatest effect on the next year’s budgetary position is caused by the investments made from the sales revenue of the sale of emission quota, the amount of which forms 1.5 per cent of the GDP. The restoration of the state payments to the second pension pillar at full extent will cost approximately 1 per cent of the GDP. The government aims to achieve a nominal budget balance in 2013, which will enable to start restoring the reserves taken into use during the economic crisis and to form a buffer for potential future recessions.
Next year, the budget deficit is intended to be covered from the reserves. Thereby the state avoids borrowing from the financial market in the current uncertain times, which — considering the loan interests — would be unreasonable and financially damaging to the state. Thus it is even more important that the cash flows of the State Treasury and other entities of the general government sector such as the Unemployment Insurance Fund and the Health Insurance Fund are managed in a consolidated way and the credit costs and burden of debt would not be increased.
Next year, the investments made by the state will help to smooth the uncertainty in foreign markets by enlivening domestic demand and contributing to creating jobs. Compared to the year 2011, investments will increase by 28 per cent to 1.25 billion euros. A fifth of the investments will be formed by the investments arising from trading quotas, which also provide a continuous saving on energy costs.
Generally, the operating expenditure of the state will not increase during the next year — it will increase by 92.3 million euros, which is mainly due to acts of law and previously assumed obligations, of which the expenditure on defence have increased by 52.4 million euros and national roads maintenance expenditure by 10.3 million euros. An increase in salary expenditure in the public sector must be based on the more effective exploitation of the existing resources and on structural reforms.
In addition to next year’s state budget, the Riigikogu also adopted several changes related to the budget, among other things postponing the salary increase of higher officials, extending the 60 per cent restriction on loans for local governments for a year and increasing the excise on alcohol by 5 per cent from February. The Riigikogu also approved the consolidation of the reserves of the Unemployment Insurance Fund and the Health Insurance Fund with the State Treasury, which increases the liquidity of the state, helps to avoid turning to the lending market and saves 28 million euros in four years within the general government sector. However, the funds are guaranteed access to their reserves at any time and in the desired amount by law.
Source: Estonian Ministry of Finance