Minister of Finance Keit Pentus-Rosimannus (Reform) said that the government was prepared to put together a supplementary state budget to cover expenses on security, growing subsistence benefits in the conditions of inflation and refugees. Supporting refugees in education is estimated to cost dozens of millions of euros.
The finance minister said that the war in Ukraine mostly affected the foreign trade, energy and raw material aspects of the Estonian economy, as well as foreign investments.
“We have been wise enough to keep exports to Russia and Belarus around the half a billion euros mark, nothing special in other words. Things are slightly different when it comes to imports that total EUR 2.8 billion. Not a huge part of GDP but significant enough to impact some major enterprises,” Pentus-Rosimannus said.
The minister added that no goods that had until recently been coming from Russia were irreplaceable.
Pentus-Rosimannus said that support measures got their start with the energy crisis.
“Of course, we need to consider the next winter. The entire European Union needs to shake Russia’s dominance in the energy sector. We need to invest, make efforts to be able to use alternative suppliers,” she said. “Investments in energy savings also need to continue.”
The minister remarked that fuel prices were highly volatile, while the excise duty was not tied to the market price.
“The higher the price, the smaller the share of excise duty as it is a fixed sum that does not depend on the world market price,” she said.
Lowering the excise duty to the lowest level permitted in the EU would affect the price by a little over 20 cents per liter. “What this would mean in the fiscal dimension would be giving up a little over EUR 50 million in a situation where we need money for national security, education.”
Pentus-Rosimannus said that slashing excise duties was not the way to help low-income families, adding that the government needed to discuss how it should be done. “I will not say changes are ruled out, while I’m also not saying there will be any.”
The finance minister said that the question when hiking defense spending was how much of it could be used for quick results.
“The times force the government to make sure no decision goes unmade, so hindsight would not reveal mistake in terms of failing to decide in time,” she said.
“There will be a supplementary budget and it will contribute to national security in a broader sense. It will include benefits for people who could find themselves in difficulty in the conditions of inflation. And it will definitely have alleviation for local governments working tirelessly on being able to accommodate refugees and offer them shelter,” Pentus-Rosimannus pledged.
Estonia has allocated EUR 1.3 million for taking in refugees, with additional education expenses still outstanding.
“Talking about supporting schools, kindergartens, local governments, we are really talking about tens of millions of euros in the long run,” she said.
Regarding energy security, Pentus-Rosimannus said she hoped an LNG terminal would be constructed.
“The LNG terminal subject matter is one of those things where we have reason to reexamine things that have stalled. Of course, other means need to be found,” the minister said. (ERR/Business World Magazine)
