The International Monetary Fund (IMF) recommended that the Estonian government stabilise public debt by limiting budget spending and increasing revenue, ERR reports. IMF experts warned that if current policies continued, public debt would become unsustainable. GDP growth alone will not solve the country’s long-term challenges, they pointed out. Achieving more sustainable growth would require increasing productivity, improving access to capital and skilled labour, supporting stable energy policies, and encouraging investment, innovation, and export diversification, the IMF report stated. Estonia’s public debt may double from EUR 10bn in 2025 to over EUR 20bn by 2030, and interest payments may reach EUR 650mn by 2030.
Meanwhile, the Organisation for Economic Co-operation and Development (OECD) also called on the Estonian government to tighten the budget and reform the tax system, ERR reported. The OECD urged the government to consolidate the state budget gradually to help finance rising health care, welfare, and defence costs. Measures to stabilise public debt could include greater spending efficiency and tax reforms, the report suggested. The OECD recommended that Estonia introduce a property tax and reduce child benefits for high-income earners. Also, the OECD pointed to the absence of a conventional corporate income tax in Estonia. Moreover, the report urged more investment in AI, green transition, climate resilience, and energy security.
Finance Minister Jürgen Ligi shared the IMF’s and OECD’s concerns, but noted that there was “no political interest” and “no public pressure” on the issues, ERR reported. He assured that the government was aware of the situation. However, since no one would discuss raising taxes ahead of elections, the focus would have to be on spending cuts, Ligi stated. At the same time, he pointed out that Estonia’s public debt was still the lowest in the EU and that Estonia’s sovereign credit rating remained high. Earlier, Ligi announced that Estonia would not use the European Commission’s proposed budget flexibility to offset rising energy costs, ERR reported. He warned that loosening EU budget rules would lead to less defence spending overall.