“The consequences of the war in Ukraine started by Russia also affect Estonia and our people. That is why we prepared a supplementary wartime budget, which will make Estonia stronger. In addition, thanks to the supplementary budget, we will be able to help the people of Estonia cope better with the setbacks caused by the combined effect of several crises,” said Prime Minister Kaja Kallas. “With the supplementary budget, we will also end the dependence of Estonia on Russian gas. We will create liquefied natural gas capacity and lease a floating LNG terminal with Finland. Estonia and our entire region will be completely independent of Russian gas during the next cold season. In addition, we decided to procure 1 tWh of state gas stocks, which is 20% of the annual gas consumption of Estonia. These decisions significantly increase the sense of security of our people regarding our ability to cope with the changed security situation.”
According to Jaak Aab, Minister of Public Administration, the supplementary budget can be used to provide solutions to many of the challenges that Estonia is facing in the midst of the security crisis. “We are in a difficult situation – we want to provide assistance to people who have fled to Estonia from the war in Ukraine, while investing in the direct and comprehensive national defence of Estonia. In doing so, we must ensure the energy security of the country. In addition, we must not forget the Estonian people, whose coping in this situation is under attack,” said the minister. “We will help our people by increasing the subsistence benefit, and additionally areas that need help in the light of the security and economic crisis will also receive additional funding.”
According to the Minister of Finance Keit Pentus-Rosimannus, the supplementary budget was prepared quickly due to the constantly changing circumstances and is an essential response to the ongoing crises. “During this difficult year, the supplementary budget will provide much needed support for strengthening the security of the Estonian people, the coping of the most vulnerable groups, and the energy security of Estonia. The entire supplementary budget is intended to offset the effects of the war in Ukraine and to cover the resulting emergency needs.”
“Urgent decisions regarding energy security will receive nearly 250 million euros from the supplementary budget of about 700 million euros – 170 million will be used to create gas stocks for Estonia for the next difficult autumn and winter periods, 30 million will be invested in building LNG capacity for the first time, we will carry out the analysis required for the decision to introduce nuclear energy, but we will also invest in energy saving, small-scale renewable energy solutions, and increasing connection capacity – these up to 27 million euros will ensure that the need for price subsidies disappears in the future,” explained the Minister of Finance.
Strengthening security and becoming independent from Russian gas
In order to ensure energy security, we will be ready to receive liquefied natural gas and lease a floating LNG terminal with Finland in Paldiski this autumn. It is also planned to procure state gas and (additional) liquid fuel stocks. Investments in both energy saving and small-scale renewable energy solutions will be supported.
The supplementary budget protection package includes the development of capabilities that can be acquired later this year. Decisions on where to direct the money are based on the proposals of the Defence Forces, taking into account that the armaments to be procured must ensure an immediate increase in military capabilities.
The supplementary budget provides support to strengthen the surveillance of the eastern border of Estonia.
This year, shelters in major Estonian cities will be marked and the development of a siren-based warning system will begin. In addition, the preparedness of the population and local governments for crises will be increased, the necessary equipment and supplies for evacuation will be acquired, and the resilience of the rescue network and the chances of coping in a war situation will be significantly improved. The state will increase the urban search and rescue, demining, and first aid capabilities of the Estonian Rescue Board.
The state is also investing heavily in strengthening cyber defence.
Despite the fact that Estonia is predominantly self-sufficient in food, the supplementary budget provides for separate funding to strengthen food security.
Increasing the continuity of radio communications will also be supported.
Ukrainian war refugees
The supplementary budget provides funding for services provided to war refugees by both state agencies and local governments.
Expenditure on Ukrainian war refugees includes primary reception costs, such as basic accommodation and meals, and essential medical care. Local governments will also be reimbursed for the costs of emergency aid related to war refugees until they have been granted temporary protection.
The supplementary budget includes the necessary investments for the preparation of accommodation for refugees, for example, the preparation of premises owned by the state. To support refugees in finding long-term accommodation, they will be provided with a one-off allowance to cover the costs of the lease contract, which will be paid to the landlord.
Most of the expenditure on war refugees is related to the provision of temporary protection services, in particular health care, employment, and social benefits. As beneficiaries of temporary protection are entitled to the same benefits, allowances, and services as permanent residents of Estonia, the budget provided for this purpose will also be increased.
Benefits and allowances include subsistence benefit, parental benefit for parents of children up to 1.5 years of age, child allowance, and allowance for a family with many children paid through local governments. Funds have been provided to support the elderly refugees in order to ensure an income in the amount of the national pension and to pay social tax for people of retirement age to ensure health insurance for those pensioners who do not receive additional support.
Due to the increase in the number of people in need, the capacity of psychosocial crisis care will be increased and rehabilitation and special care services will receive additional funding, as well as food aid and the necessary aids.
In order for refugees to enter the Estonian labour market as soon as possible, they will be given access to the labour market services of the Unemployment Insurance Fund. Unemployment allowance will also be paid to refugees registered as unemployed if the conditions are met, and funds will also be provided for the payment of work ability allowance.
All refugees arriving from Ukraine will receive emergency medical care and will be offered the opportunity to undergo a medical examination and, if necessary, be reimbursed for the necessary medicines. Beneficiaries of temporary protection have the same right to health insurance and health services as Estonians.
As the Estonian National Social Insurance Board has a greater role in the reception of refugees, the Board will receive additional resources to organise the reception, catering, and accommodation of refugees and to coordinate the granting and payment of benefits and allowances and the provision of social services to refugees. The supplementary budget also sets out the long-term costs of resolving the crisis, which include costs for IT developments, additional workforce, and communication activities.
The additional funding is intended to strengthen the Estonian education system so that Ukrainian children and young people can continue their studies and pre-school children can attend nursery school. The additional funding will support better adaptation and integration of children and young people.
The state will also increase funding for language learning, including additional training for Estonian language teachers. Beneficiaries of temporary protection must participate in A1 level language learning in order to cope better in Estonia. Information on enrolment in language courses is automatically available to all beneficiaries of temporary protection. In order to ensure a better understanding for the refugees of the functioning of the Estonian state and society and the daily organisation of life, the state finances an adaptation programme for beneficiaries of temporary protection. War refugees who have arrived in Estonia will be able to participate in language learning to a greater extent as well as in the compulsory adaptation programme in a few months.
Coping of the Estonian people
With the supplementary budget, the subsistence level of Estonian residents will be increased from 150 euros to 200 euros. Housing loans will be provisionally considered an expense when determining the subsistence benefit.
An amount is set aside in the reserve fund of the government to alleviate the price of energy and the cost of living at the start of the new heating season for the people who need it most.
As a temporary tax change, the government coalition agreed to reduce the excise duty on special-purpose diesel fuel to the minimum level allowed by the EU, which is 21 euros per 1,000 litres, by the end of 2022. The current rate of excise duty is 100 euros per 1,000 litres. Special-purpose diesel fuel is permitted to be used in agriculture and, for a limited period, in oil shale mines until 30 April 2023. Special-purpose diesel fuel can also be used for commercial fishing if it is exempted from excise duty under an excise duty exemption certificate.
The government also agreed to reduce the 9% reduced VAT rate for press publications to 5%, the rate currently in force in Latvia and Lithuania. This will support fairer competition in the press and promotes the wider availability of quality Estonian-language journalism.
