Government approves supplementary budget for 2008

In today’s meeting the Government approved the draft supplementary budget for 2008. The supplementary budget decreases the revenue of the budget for 2008 by EEK 6.1 billion and the expenditure by EEK 3.2 billion.

“Given the changed economic environment, a negative supplementary budget was the right and vital step for attainment of the general government balance. I appreciate the work of my colleagues in all the ministries with whom we achieved the required cut of the budgetary expenditure and prepared the supplementary budget," said Finance Minister Ivari Padar.

The EEK 6.1 billion decrease of the revenue in the supplementary budget arises mostly from expected lower tax revenue. “Keeping the good health of the economy in mind, it is an important sign that consumption and borrowing has decreased in Estonia. However, thereby we also have to take lower tax revenue into account as well,” explained Padar.

Compared to the initial budget for 2008 the supplementary budget proceeds from lower tax revenue, especially regarding value added tax and social tax. The total revenue is also affected by adjustment of total EU aid.

The supplementary budget cuts the expenditure by EEK 3.2 billion. The cut of the planned expenditure of the constitutional institutions, the State Chancellery and the ministries amounts to the largest portion thereof, i.e. EEK 1.6 billion. On average, the expenditure of the area of government of the ministries and the State Chancellery was cut by 7 percent.

“Cutting budgetary expenditure was a tough decision for all the ministries. We acted on the principle that the state cannot cut costs at the expense of people’s health, feeling of security or education,” said the Finance Minister. “Therefore the expenditure in the fields of education, social affairs, internal security and national defence has been cut to a smaller extent.”

In addition, approx. EEK 700 million of the total cut of EEK 3.2 billion comprises the reduction of expenditure arising from lower tax revenue. This means that allocations to, for instance, the Health Insurance Fund, mandatory funded pension, and road administration will be smaller. Furthermore, the decrease of expenditure dependent on other revenue, mainly foreign aid, to the extent of nearly EEK 0.9 billion plays an important role.

“I am fully confident that these changes will not affect the daily life of the people of Estonia. The people will continue to receive pension, high-quality medical assistance and good education to the agreed extent,” the Minister assured.

A brief summary explaining the supplementary budget and cuts in general as well as the draft supplementary budget and its explanatory memorandum are available on the Finance Ministry’s website at http://www.fin.ee/?id=77977.

NB! Background information (.doc)

For further information please contact:

Piret Seeman
Ministry of Finance
Communications Department
Telephone: +372 611 3035
Mobile: +372 524 4244
E-mail: piret dot seeman at fin dot ee