Government may delay or cancel infrastructure projects to cut deficit

Estonia’s government may postpone or cancel some planned infrastructure and real estate investments to reduce next year’s budget deficit and potentially fund small pay rises for teachers and firefighters, Education and Research Minister Kristina Kallas told ERR.

Kallas said the government had reviewed all revenues and expenses during budget negotiations and identified possible savings across all areas.

“We have also reviewed the investment portfolio and the state’s real estate costs. The budget for the coming years is broadly in place in that sense,” Kallas said. She added that the government still needed to finalise which projects could receive additional investment next year.

According to Kallas, the government can no longer reduce spending on people, including benefits and salaries, and is therefore looking at infrastructure investments and real estate costs instead.

“We cannot start cutting benefits, such as higher education support or hobby education support, or the investments we make in people. I do not see room for cuts there, as we have already cut them significantly,” she said.

Kallas said some state-funded construction projects could either be cancelled or moved to later years to improve the budget position. Infrastructure investments mainly involve road construction and Rail Baltica, although they also include port and building projects.

She said savings of several hundred million euros could be achieved by cancelling or rescheduling such investments. Kallas added that Estonia’s infrastructure construction market, worth about one billion euros, was close to full capacity because of Rail Baltica. Further state investment could overheat the market and drive up prices, she said.

Former Economy Minister Erkki Keldo has also previously said that infrastructure investments would need to be cut.

The Reform Party has sought to reduce next year’s budget deficit to 4% of gross domestic product, a reduction of half a percentage point. Kallas said Estonia 200 and the Reform Party had not yet agreed on that target, although they had reached an understanding that investments could be cut.

Kallas said work was still under way to find a way to fund pay rises for teachers and firefighters.