The Bill on supplementary budget passed the first reading in the Riigikogu

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The Bill on supplementary budget passed the first reading

The aim of the Bill on the Supplementary Budget for 2024 (456 SE), initiated by the Government, is to ensure the financial stability and sustainability of the country.

Minister of Finance Mart Võrklaev explained that, on 8 December 2023, the Riigikogu had adopted the state budget for 2024, which had a revenue volume of approximately 16.7 billion euro and an expenditure volume of 17.7 billion euro, and an investment and investment subsidies budget of approximately 1.9 billion euro.

“According to last year’s summer economic forecast, on the basis of which the Government prepared the 2024 budget, Estonia’s public finances were in a difficult situation. The main problems stemmed from a long-term budget deficit and rapid expenditure growth outpacing revenue growth. The deficit was exacerbated by soaring interest costs,” the minister admitted.

According to Võrklaev, the state budget for 2024 has been adopted in such a way that it contains decisions in the order of 500 million euro to improve the budget and put it on a sustainable path. This follows savings decisions totalling around 850 million euro over the period 2024–2027. This includes both last year’s ministerial savings and making allowances for families with many children more affordable for the state.

Võrklaev noted that this year’s spring economic forecast, published on 3 April, was more pessimistic than the previous one. The economic recovery has been slower and so tax revenues have been lower. “If the state receives less revenue, it will have to make additional efforts to rein in spending as well. To this end, the Government decided to make a negative supplementary budget for 2024,” the minister said.

Reducing the state budget deficit is a preparatory step for drafting next year’s national budget where it will have to be ensured that up to 80% of the austerity measures will be of a permanent nature and meet the target of reducing budget deficit in future years. In order to bring the general government deficit below 3% of GDP this year and to comply with European Union budgetary rules, it has been decided to bring government revenue and expenditure closer together by 183 million euro, with a budgetary impact of 173 million euro.

Including the supplementary budget measures, this year the general government deficit will reach 1.19 billion euro, or 3% of GDP. The negative supplementary budget includes 115 million euro in savings measures and 68 million euro in revenue measures. All ministries and agencies, as well as public foundations, will contribute to savings, saving mainly on their operational and management costs. The amount of savings for ministries will be in the order of 63 million euro.

Võrklaev said that the Government did not plan to cancel major investments, but the state of the budget would be affected by the postponement of some investments. The agreement is that investments should be put in place as soon as possible. “We have set a target that 70% of investments and investment subsidies will have to be committed by August this year in order to implement the investment budget to the maximum extent by the end of the year. The task of the supplementary budget has been to take an honest look at which investments can be delivered this year and which ones cannot,” the minister said.

The negative supplementary budget will not reduce funding for national defence which is the highest priority sector. However, the Ministry of Defence, in solidarity with others, is finding ways to save on labour and management costs. The funds released will be channelled into improving defence capabilities.

In the area of government of the Ministry of the Interior, the saving will come at the expense of one-off costs in the order of 3 million euro. This time, the budget savings measures do not concern the foundations of museums, theatres or concert organisations, or legal persons governed by public law. Hospitals have been given a guideline to improve their budgetary position by reducing operating costs to the extent of 1%. The level of research and development and innovation expenditure will be reduced to 1% of GDP, taking into account the revised GDP forecast, while maintaining the agreed target.

To increase revenue, we have decided to increase the amount of dividends from the State Forest Management Centre and Elering Ltd. In addition, the reserve of the Government of the Republic, both unallocated and earmarked, will be reduced.

The aim of the supplementary budget is to ensure the country’s financial stability and allow the Government to respond flexibly to different situations and needs that may arise during the year. “A negative supplementary budget is one of the necessary steps to achieve this goal,” Võrklaev said.

The Chairman of the Finance Committee Annely Akkermann gave an overview of the discussion that had taken place in the Committee.

During the debate, Urmas Reinsalu (Isamaa), Priit Lomp (Social Democratic Party), Andrei Korobeinik (Centre Party), Maris Lauri (Reform Party) and Kert Kingo (Estonian Conservative People’s Party) took the floor.

The Estonian Centre Party Group moved to reject the Bill at the first reading. The motion was not supported because 15 members of the Riigikogu voted in favour, 50 were against and there was one abstention. The first reading of the Bill was concluded and the deadline for submission of motions to amend was set for 4 p.m. on 12 June.

The Riigikogu heard replies to three interpellations

Prime Minister Kaja Kallas replied to the interpellations submitted by members of the Riigikogu concerning the increase of the pioneer capability of the war-time Defence Forces in light of the experience of the present stage of the Russian-Ukrainian war  (No. 607), Ukraine’s accession to the European Union (No. 613) and the non-taxation of the extraordinary profits of banks (No. 615).

At the beginning of the sitting of the Riigikogu, the justice of the Supreme Court Oliver Kask took his oath of office.

Urve Tiidus took the floor during the open microphone.

The sitting ended at 5.27 p.m.

Photos (Author: Erik Peinar, Chancellery of the Riigikogu)

Verbatim record of the sitting (in Estonian)

Video recording will be available to watch later on the Riigikogu YouTube channel.

Riigikogu Press Service
Gunnar Paal
+372 631 6351, +372 5190 2837
gunnar.paal@riigikogu.ee
Questions: press@riigikogu.ee

Link uudisele: The Bill on supplementary budget passed the first reading in the Riigikogu

Source: Parliament of Estonia