Priorities of the 2024 state budget and the budget strategy for 2024–2027
Estonia’s military and broad national defence
In 2024, Estonia’s defence budget will exceed three per cent of the gross domestic product for the first time, plus the cost of hosting allies. 1.33 billion euros will be spent on defence next year, and nearly 5.6 billion euros in the years 2024–2027. This will increase Estonia’s independent defence capacity and readiness to defend Estonia together with our allies in NATO. The state will allocate more than 50 per cent of the defence budget to procurements, which puts us at the forefront in comparison with other NATO members. Estonia has significantly increased its ammunition reserves and the country’s defence capacity will increase on land, in the air, as well as at sea. We will also invest in the defenders of the state and their equipment and continue to maintain the combat capability of land defence. We will finance the Estonian Defence League with nearly 300 million euros in 2024–2027.
From 2024, additional funds of an average of 9 million euros per year will be allocated to the national defence tasks of the Ministry of the Interior. This will increase the crisis reserve of the Police and Border Guard Board, including means and opportunities for recruiting assistant police officers.
Protecting the Estonian border and building the eastern border continues to be a priority for the state. Therefore, a total of 15.2 million euros will be allocated for this purpose for 2024 and 2025.
The Information System Authority will be allocated funds for permanent funding for cyber security to continue cyber security testing and training of state institutions and providers of vital services, and to develop a cyber security reserve.
The Tax and Customs Board is increasing its preparedness for crises and its ability to monitor sanctions.
In addition, permanent financing of the civil protection investments made last year and the crisis capabilities of the Ministry of Social Affairs will be ensured. More specifically, the Estonian Rescue Board will be provided with funding for the storage of evacuation supplies and ensuring the reliability of sirens for emergency notification.
To maintain and increase the crisis resilience of residents and local governments, permanent funding will be provided for the corresponding public protection trainings.
As part of population protection, permanent funding for healthcare and social protection will be ensured within the jurisdiction of the Ministry of Social Affairs to help people in crisis. To this end, the healthcare reserve for disaster medicine will be increased and the monitoring and control of infectious diseases as well as permanent funding for mental health crisis assistance will be ensured.
Under the responsibility of the Ministry of Climate, the Environmental Board will renew the technical equipment of 15 radiation monitoring stations and laboratories previously built from foreign aid funds, to ensure 24-hour radiation monitoring and early warning of the population and the implementation of radiation protection measures.
Education
Next year, out of all state employees, only the salaries of teachers will increase. In the 2024 budget, the labour costs of teachers are set at 561.9 million euros, which will increase by 23.72 million euros. Along with the increase in the differentiation fund, the estimated average salary of teachers will increase by 4.3 per cent. In addition, the state will support teachers and support specialists entering work for the first time, allocating a total of 3.7 million euros as initial support.
The planned implementation of the action plan for the transition to Estonian-language education will continue in full next year. The budget will increase by 27 million euros, and in 2024, 71.9 million euros have been earmarked for the transition to Estonian-language education, of which 3 million are foreign funds. The transition to Estonian-language education will begin in kindergartens and in grades 1–4 in 2024 and, according to the coalition agreement, will last until 2030.
The provision of higher education at universities and institutions of professional higher education will be supported with 247.7 million euros next year. 232.3 million euros have been planned for operational support for higher education, an increase of 15 per cent compared to the current level. The priority is to ensure the sustainability of higher education in Estonian and the competitive salary of teaching staff, and to develop the quality of higher education. From this academic year, the rates of need-based study allowances were doubled; an additional 5.2 million euros have been planned in the budget to this end.
The broad agreement to allocate 1 per cent of the GDP to research funding remains in the 2024 state budget.
Economic recovery and the green transition
In 2024, the state will allocate 1.9 billion euros as investments and investment subsidies to revive the economy, of which approx. 1.1 billion are foreign funds and nearly 800 million comes from Estonian taxpayers.
For the economy to fit within the boundaries of nature, the state will focus on environmentally friendly economic growth and will develop a clean and diverse living environment.
The state will allocate 20 million euros over four years for the restoration of nature and ecosystems. To accelerate the transition to a circular economy and valorise natural resources, attention will be paid to resource efficiency and a waste reform will be implemented.
The state will simplify and accelerate the start of green energy production so that there will be more affordable clean energy on the market. To this end, a total of 155 million euros will be invested in the years 2024–2027. Among other things, contributions will be made to the transition of district heating to renewable fuels, the strengthening of electricity networks, and the construction of new connection capacity.
In the next few years, 96 million euros of foreign funds will be invested in the development of environmentally friendly public transport and bicycle lanes. In addition, we increased investments in the development of public transportation and bicycle lanes by 70 million euros over the next four years. The state will continue the electrification of the railway by increasing its funding by 54 million euros. The budget includes 11 million euros for the construction of the electric charging infrastructure of the ports in Virtsu and Kuivastu, so that in 2026, the first electric ferry could start operating on the Virtsu-Kuivastu line.
The construction of the main line of Rail Baltica will begin in 2024. We will invest a total of 216 million euros in the construction of Rail Baltica.
To improve nationwide public transport, the government will allocate a total of 60 million euros over the next two years. The plan is to make the use of public transportation easier for passengers and develop a unified ticket sales software and convenient ticket products. The aim is to also improve the accessibility of public transport for the visually impaired and the hearing impaired. The ferry connection between Hiiumaa and Saaremaa will be guaranteed both in the morning and in the evening.
In cooperation with the private sector, the state will support the growth of competitiveness and productivity of the Estonian economy. The first applied research centre will be launched in Estonia, which will help increase the research intensity and innovativeness of Estonian companies. In 2024, the endowment capital for corporate loans of the Estonian Business and Innovation Agency will increase by 100 million euros to support Estonian companies entering foreign markets. In addition, the country is developing an export loan for Ukraine to give companies the confidence to expand into the Ukrainian market and restore the Ukrainian economy.
The state is also moving forward in terms of the digital transition and will direct money to the development of a personal state based on data and modern technologies. Public services will become more efficient and convenient for both citizens and businesses, and the use of artificial intelligence will increase in the public sector. The prerequisites for this are good basic IT services and a high level of cyber security. To ensure this, the state will invest an additional 23 million euros in 2024.
The state will also develop a system of labour market services and subsidies to help people return to the labour market.
In addition, the state will contribute to increasing the competitiveness of the business environment. The fight against economic crime will continue to be a priority.
The sustainability of public finances
Budget rules must be within the means of the state and help to improve the state’s finances. The structural deficit of the 2024 budget will remain at the same level (–1.2% of the GDP). This is part of the flexibility of the EU rules, where structural adjustment is not essential next year in the case of a very bad economic situation. For the following years, i.e. starting from 2025, we plan to keep the structural position of at least –1% of the GDP or better.
To get the state’s expenditures under better control, a budget audit has been initiated concerning the areas of government of all ministries. Its aim is to find areas of efficiency in the provision of state services.
We will start with the budget audit of the Ministry of Social Affairs, the Ministry of Economic Affairs and Communications, and the Ministry of Finance, all of which have large budgets. By making state services more efficient and making subsidies needs-based, the three ministries are expected to save 150 million euros.
Fair competition and the smart and efficient collection of taxes are also important for the state. The state will be making tax supervision more efficient, both in collecting income tax and VAT; we are also using the capabilities of artificial intelligence to this end. As a result, we will save 12 million euros of taxpayers’ money, and with revenue measures, we will have a total of nearly 100 million euros of additional money after four years.
To improve the state of the budget, the government has already decided to gradually increase the gambling tax and excise rates for alcohol and tobacco. The increase in the excise duty of tobacco and alcohol alone should bring at least 63 million euros to the state’s revenues over the next two years.
In 2024, the state will raise VAT to 22% (at the moment, it is 20%). The increase in sales tax will bring a total of 235 million euros in revenue to the state in 2024.
Supporting Ukraine
Estonia continues to support Ukraine and does so through international funds, the European Union budget, and directly through the state budget. In 2024, we will allocate a total of 29.2 million euros to support the reconstruction of Ukraine.
Together with the partners of the European Union, Estonia will significantly increase its contribution to European peace funding, to which the Ministry of Foreign Affairs and the Ministry of Defence plan to allocate approximately six million euros per year until 2027. Bringing Ukraine into the membership of the European Union and NATO, as well as participating in the reconstruction of Ukraine, protects the security of Estonia and the whole of Europe.
The reconstruction of Ukraine will be the biggest strategic economic project in Europe in the coming years. Today, Estonia has already made a significant contribution to the reconstruction of Ukraine by building a kindergarten and a bridge in Zhytomyr Oblast, and is helping to create family dwellings in Ukraine. The goal of Estonia is to participate in this process and offer Estonian companies significant growth potential. Therefore, the state will contribute 14 million euros yearly in the following years to direct reconstruction activities directed towards Ukraine.
The main messages of the state budget by ministries can be found here:
