The IMF commended Estonia's fiscal policy and advised to continue consolidating public finances in the next years
The IMF's Executive Board approved this week the annual report on the economic situation and outlooks of Estonia. The report is the result of the IMF mission's autumn visit to Estonia and it commends Estonia's current economic policy and the decisive steps taken to consolidate the general government budget.
"Similarly to other countries, the global economic crisis has also affected Estonia, putting the country's economic resilience and ability to adjust to a serious test. The IMF's report states that in general, the Estonian economy has coped well with the challenges faced," said Governor of Eesti Pank Andres Lipstok.
According to the Ministry of Finance, the IMF's report is a confirmation that the choices Estonia has made have been correct. The IMF commends the country's fiscal consolidation, the objective of adopting the euro and the adjustment ability of the economy. Long-term fiscal sustainability has provided us with a competitive edge in exiting the crisis and opened the door to the euro area.
"The report supports our fiscal policy choices and we agree with the standpoint that structural changes to improve the position must be continued. The cabinet has decided to increase the retirement age to 65 years and cancel special pensions. In addition, we are discussing the phasing-out of mortgage interest tax deductibility. All this is in line with the report," said Minister of Finance Jürgen Ligi.
"The IMF stressed that prudent fiscal policies should be continued in order to adjust smoothly in the euro area," Lipstok said.
He added that it is also important the IMF is of the opinion that even if the share of non-performing loans somewhat increases, it will not pose considerable risks to the country's financial stability. The banks' liquidity and capitalisation are absolutely sufficient owing to the capital adequacy requirements and full integration with strong Nordic banking groups.
The report approved by the Executive Board is based on thorough bilateral discussions in the framework of the Article IV consultations in Estonia in October last year. The staff visit lasted nearly two weeks and included meetings with representatives from both the public and the private sector.
The IMF's report is available on the web sites of Eesti Pank and the IMF.
The IMF's Executive Board (the Board) is responsible for conducting the day-to-day business of the IMF. The Board discusses the economic developments of the Fund's member states and the political advice of the IMF (Article IV reports) and approves loan program arrangements with members states. The Board composes of 24 Directors.
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