Representatives of Riigikogu committees met with IMF delegation
The Finance Committee and the Economic Affairs Committee met with the delegation of the International Monetary Fund (IMF) and gave an overview of the state of Estonia’s financial sector and the economy.
The IMF delegation inquired about the 2026 budget and the medium-term state budget strategy. Other questions concerned supporting economic growth and innovation and making Estonia’s business environment more attractive for foreign and domestic capital.
The Chairman of the Finance Committee Annely Akkermann, members of the Committee Maris Lauri and Mart Võrklaev, and the Chairman of the Economic Affairs Committee Marek Reinaas outlined the factors affecting the state budget, the planned changes in taxation, the state of the economy, and the measures to ensure energy security. The high volume of defence investments is temporarily increasing the deficit of the current account. Next year, the state defence expenditure will increase to 5.3% of the GDP.
“This year, the budget deficit will decrease to 1.0% of the GDP thanks to increased taxes; however, the rapid increase in defence expenditure and changes in the income tax next year will take it to 4.0% of the GDP,” Akkermann admitted. She added that the deficit would be reduced step by step each year, reaching 2.8% of the GDP by 2029. State revenue is predicted to decrease by EUR 780 million due to the introduction of the uniform EUR 700 income tax exemption and the cancellation of the planned 2 % increase in income tax. The tax burden in Estonia will fall from 36.6% to 35.2%.
According to the State Budget Bill, the planned general government deficit will be 4.5% of the GDP next year, which will remain within the limits of the exemption granted by the European Union for rapid increases in defence spending. Next year’s debt burden will grow by EUR 1.7 billion to 25.9% of the GDP.
The Ministry predicts a 5.4% increase in prices this year. Akkermann referred to an analysis by the Ministry of Finance, which said that the inflation would slow down to 3.5% annually in 2026, when the increase in the prices of food and services slows down and the impact of the tax measures diminishes.
Due to the significant increase in the budget deficit, next year’s debt burden will grow by EUR 1.7 billion to 25.9% of the GDP.
The national debt burden will increase because of all the additional costs and is predicted to reach 31.4% of the GDP in 2029, and the interest costs to 0.8% of the GDP, or EUR 417 million.
The Chairman of the Economic Affairs Committee Marek Reinaas pointed out that the economy was slowly recovering according to the forecast. “Economic growth is an inevitable requirement in tidying up the budget. I am happy to know that the economy is on its way up,” Reinaas said. “The upward curve of the economy promises a 1% increase in the GDP for this year and 2.5% for the next.”
“The Estonian economy has all it takes for a new technology intensive growth cycle. Keeping the investment environment attractive, offering clean energy, making capital accessible to businesses and changed needs in a flexible way all ensure that Estonia has a successful economy,” Reinaas explained. “To solve challenges related to energy and achieve a more affordable price of electricity we are investing into building wind farms because the Expert Panel on Competitiveness created at the Economic Affairs Committee sees this as unavoidable to ensure that uncontrollable green energy makes up 70% in our energy portfolio,” Reinaas explained.
The IMF monitors the economies of its member countries, including Estonia, in the context of the economic policy consultations that generally take place once a year. The common name “Article IV consultations” derives from Article IV of the IMF’s Articles of Agreement. IMF’s national cooperation partner in Estonia is Eesti Pank (Bank of Estonia), which publishes summaries of the missions on its website.
The mission team specifies the objectives, scope, details, timing, and expected results of the Article IV cycle. It engages in discussions on recent macroeconomic, fiscal and financial developments, prospects, risks, and policies. The mission team is interested in feedback from the Riigikogu committees on their analytical and policy agenda before the Article IV consultations.
As this is an interim mission of the IMF, the team will not prepare a summary statement and there will be no press conference at the end of the mission. However, the interim mission is important because it usually prepares the first version of the Article IV report, which is supplemented with additional topics and economic policy messages during the mission. The outcome of the consultation is a report reflecting the IMF experts’ assessment of Estonia’s economic policy. The IMF discusses important economic policy issues with all member states.
The IMF mission is headed by Vincenzo Guzzo; he is accompanied by Bingjie Hu and Carlos de Resende, and energy expert Hugo Rojas-Romagosa.
Photos (Erik Peinar / Chancellery of the Riigikogu)
Riigikogu Press Service
Gunnar Paal
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Maris Meiessaar
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