Tallinn - Estonia received warnings Monday about
'unsustainable' spending along with a call for a more balanced budget
during a visit by the International Monetary Fund (IMF) to the
recession-hit Baltic state.
Although Estonia has not yet borrowed any funds from the IMF to
help it through its recession, IMF representatives met with
government officials for an update on the country's economic
situation.
Such visits are routine for IMF members states, though the depth
of the country's recession has prompted speculation that it might be
forced to borrow money.
The federal budget being prepared by the government of Andrus
Ansip must include 'fundamental rebalancing of fiscal expenditures
and revenues,' warned the IMF at the conclusion of its meeting with
Estonian officials.
Speaking at the Estonian central bank, the IMF's Christoph
Rosenberg said the government's target of a budget deficit equivalent
to 3 per cent of GDP was 'appropriate' and would help the country
toward its goal of adopting the euro as its currency in 2011 or 2012.
'Given the uncertain outlook, all options - on both the revenue
and the expenditure side - should be considered,' Rosenberg said.
Marten Ross, the deputy governor of the Estonian central bank,
said much had already been done to address the issues raised by the
IMF in both the public and private sectors.
'I would like to highlight that the economy and structural changes
are underway ... and there are the first signs of economic
stabilization. Only in this way can we create and maintain confidence
in the Estonian economy to accelerate the growth of new investment,'
he said.
After years of spectacular growth, the Estonian economy plunged
into a deep recession in 2008 in which it is still stuck.
However, unlike neighbouring Latvia, Estonia did set aside some of
the money generated during the boom years and has not yet been forced
to seek a bail-out from the IMF, though it has received assistance
from other lenders, including Sweden.
Attempts to draw up a revised budget, including big cuts in public
expenditure, are putting pressure on Ansip's coalition government.
There are signs that one coalition party may leave, to be replaced by
an opposition party.
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