Finances and state budget

Money is a means of payment that is stated and approved by the State. The three main functions of money are the function of a means of exchange and payment, the function of preserving value and the function of etalon for value of goods and services. Money circulation can take place as cash transactions, bank transfers, issuing checks and via electronic means of payment. The only legal means of payment in the Republic of Estonia is the Estonian kroon (EEK).

 

The Estonian National Bank organises the money circulation in Estonia and ensures the stability of the value of the State.

 

The management organs of the Estonian National Bank are its Council and its President. The Council consists of the Chairperson and eight Members. The Chairman of the Council is appointed by the Riigikogu for five years, according to the suggestion of the President of the Republic. The Members of the Council are appointed by the Riigikogu for five years, according to the suggestion of the Chairman of the Council. The President of the Estonian National Bank is appointed by the President of the Republic for seven years, according to the suggestion of the Council of the Estonian National Bank.

 

The Estonian National Bank answers to the Riigikogu. The Riigikogu approves the annual report of the Estonian National Bank and appoints the auditor for verifying the annual report. Economic activities of the Estonian National Bank as a state institution can be inspected by the National Audit Office.

 

State taxes, burdens, fees, penalties and mandatory insurance payments are stated in the law. This means that the determining of taxes is a sovereign and inalienable right of the parliament.

 

National financial supervision is performed by the Financial Supervision Authority. The Financial Supervision Authority is an institution at the Estonian National Bank, having an autonomous competency and a separate budget. The Financial Supervision Authority performs state supervision over securities market, banks, insurance providers, insurance mediators, investment associations and management companies active in Estonia under activity licenses.

 

The state budget can be considered the economic plan of the State for the coming year. The Riigikogu has the task of approving the state budget. The state budget is proceeded like a law, and the draft of the state budget can be initiated only by the Government of the Republic. By approving the state budget, the legislative power gives the executive power the consent for spending the relevant funds, thus controlling and delimiting the activities of the government. According to the Estonian practice, the state budget for a specific year and the legal acts necessary for implementing the state budget (for example, the formula for calculating the support funds to be allocated for local budgets, the rate of the child benefit, etc.) are approved as a single law. The state budget is approved for each year. The government is obliged to present the draft of the state budget to the Riigikogu at least three months before the beginning of the budget year (no later than by October 1).

 

If the government wishes to make expenses not stated in the state budget or to increase the expenses stated in the state budget, then an additional state budget has to be approved. An amendment of the state budget is considered to be the situation where the expenses of the state budget are rearranged so that the total amount of revenues and expenses in the state budget doesn’t change.

 

The preparing of the draft for state budget is co-ordinated by the Ministry of Finance. Every year, together with preparing the draft budget of the relevant area of government, the ministries also prepare the plan of activities and economic development of the relevant area of government and also the investment plan for at least the next three budget years. This is followed by the negotiations of the draft budget between the Ministry of Finance and the relevant ministry or constitutional institution. Any disputes are solved in the Government of the Republic. The final draft of the budget is approved by the Government of the Republic. Together with presenting the draft of the state budget to the Riigikogu, the overview of the economic situation of the country and the main goals of the Government of the Republic and the letter of explanation to the draft of the state budget are also presented to the Riigikogu.

 

The implementation of the state budget is also organised by the Ministry of Finance. All revenues and expenses are accounted via the State Treasury in a centralised way.