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Today, the Riigikogu started the first reading of the State Budget of the Year 2013 Bill (278 SE), initiated by the Government, which was adjourned due to the end of the working hours of the sitting of the plenary assembly. The Minister of Finance Jürgen Ligi who presented the budget before the plenary assembly said that, in the drafting of the state budget, again a situation has arisen where the recovery of the global economy has become questionable and debt problems of some euro zone countries are holding back the potential growth. Ligi stated that Estonia will again have the fastest growing economy of the euro zone in 2013, the growth amounting to 3%, according to the forecast.

“The budget position of the government sector will still be in deficit of 0.7% of GDP in the coming year, but it is a very good result in the European context. The central government, in particular a deficit in pension insurance, will be mainly responsible for the deficit,” Ligi continued. The Minister of Finance stressed the importance of budget balance which also helps prevent falling into loan dependency. The debt burden of Estonia will remain the lowest in the European Union in the coming year, at around 12% of GDP, and it will increase only mainly due to EFSF guarantees. The average debt burden of euro zone countries is 83% of GDP. According to the budget for 2013, the state budget revenue will increase by 163.1 million euro, that is, by 2.2%, to 7.5 billion euro, and the expenditure – by 1.1% to 7.7 billion euro.

In Ligi’s words, the general tax burden will fall to 32.6 % which is the lowest in five years. The Minister confirmed that next year’s state expenditure has been planned responsibly, in consideration of long-term impacts. At the same time, it will be possible to increase the social security of people next year. Needs-based child benefits will be implemented, the salary fund of the areas of government will rise, and pensions as well as unemployment allowances will increase. “In comparison with European Union countries, we continue to contribute relatively more to education, culture, national defence and internal security. The state will spend over 18 million extra euro on education reforms next year. With this amount, the Government will guarantee the needs-based study allowances and reform vocational training study programmes and the general education school network. The budget of the cultural sphere will guarantee the financing of the construction of the Estonian National Museum, and the defence budget will remain at 2% of GDP. More extensive increases in expenditure are connected with the increasing social protection: the state pension insurance expenditure will grow by 93.3 million euro, the health insurance expenditure of the Health Insurance Fund – by 55 million, and state contributions to the mandatory funded pension scheme – by 9 million euro. The state will pay different social benefits 1677 euro per person on the average,” the Minister added.

The volume of government sector investments will decrease next year. Less than a half, that is, 48% of investments will be made from foreign supports in the coming year. The volume of state budget investments and the State Real Estate Ltd investments will grow by 44 million euro and it will account for more than a quarter of the volume of the government sector investments. “Larger facilities are connected with the road management, the water and waste management, and the hospitals and welfare services network infrastructure which will receive 195.6, 161.9 and 46 million euro, respectively,” Ligi noted. The operating expenses of the state will increase next year. In addition to the increase of the salary funds in the areas of government by at least 4.4%, a significant share of the growth is connected with special purpose equipment of the Defence Forces, road management, state real estate lease payments and the education reform.

“In summary it can be said of the next year’s budget that it is the first in several years in which we simultaneously increase the salaries of public sector workers as well as different social benefits, including pensions, child benefits and unemployment benefits. Internal reorganisations of the areas of government have also given space for changes, in the preparation of both the distribution of child benefits and the education reform. In the final analysis, it is more efficient work, and not dreaming and making demands, that brings extra money to the budget. A long view on actual needs and opportunities will continue to be the main issue of the budget policy,” the Minister of Finance concluded his report.

The first reading of the State Budget of the Year 2013 Bill will be resumed on Wednesday, 24 October, at the sitting beginning at 2 p.m.

The Riigikogu Press Service