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The Governor of the Bank of Estonia Ardo Hansson replied to the interpellation concerning allowing the state budget to go into deficit (No. 347), submitted by members of the Riigikogu Andres Herkel, Andres Ammas, Ain Lutsepp, Külliki Kübarsepp, Krista Aru, Monika Haukanõmm and Artur Talvik on 6 April.

The interpellators referred to the Government’s justification for allowing the state budget to go into deficit which would have a significant economic policy impact. The interpellators also highlighted the position of the Governor of the Bank of Estonia that he had expressed in the press in which he had called the amendment of the basic Act on the state budget, planned by the Government, “opportunistic”.

The interpellators wished to know what economic policy risks were involved in the Government’s new approach to budgetary balance, and whether there were examples of implementation of such an approach in other countries.

Hansson said that the possibility of a small deficit is relatively common in Europe, but the structural deficit of 0.5 percent is intended for the minimum goal, in order to manage for example in a situation of very strong recession where this 0.5 percent is intended for achieving the three per cent nominal deficit. “I think that, at present, a small deficit in Estonia would create problems for our long-term economic growth, but it would not create problems for the sustainability of the budget in the near future because our public debt is small,” the Governor of the Bank of Estonia said. He stressed that a slightly stricter budget policy and larger reserves than in Europe suit Estonia. Hansson explained that we have an ageing society and we will receive less European funds in the future than we have today, and therefore it would be necessary to adopt a somewhat stricter approach.

“In fact it could be said that, due to using European Union financial aid which has accounted for around 2.4 per cent of GDP in the past five years, we are actually in a substantial deficit,” the Governor of the Bank of Estonia said. He noted that, since it is assistance, we are not taking it into account, it does not create debt, but stimulates and affects the welfare of our economy, and to some extent we have grown accustomed to spending it. “We know that drawing up the budget will become more difficult in the future, European Union financial aid is decreasing and the population is ageing. There are several admonishing examples in Europe where the minimum requirements for the budget become habitual behaviour over time which causes difficulties in the economy. So, that is a greater risk of finding ourselves on a slippery slope, rather than the chance of this 0.5 percent in itself having a strong impact in a shorter-term perspective,” Hansson said.

Prime Minister Jüri Ratas replied to the interpellation concerning a potential threat to social cohesion and security if administrative reform is carried out in Ida-Virumaa according to the plan of minister Korb (No. 333).

The Minister of Rural Affairs Tarmo Tamm replied to the interpellation concerning the support for replacement of agricultural producer (No. 325).

The Minister of Public Administration Mihhail Korb replied to the interpellation concerning the outcomes of administrative-territorial reform in Viljandi county (No. 327); the interpellation concerning problems with administrative reform near Lake Peipus in Tartu county (No. 328) and the interpellation concerning problems with administrative reform in Luunja in Tartu county (No. 329).

The sitting ended at 8.22 p.m.

Verbatim record of the sitting (in Estonian):

Video recordings of the sittings of the Riigikogu can be viewed at

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Riigikogu Press Service
Gunnar Paal,
6316351, 51902837