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 since 1st of January 2011 is Euro.
Eesti Pank
Eesti Pank is the central bank of the Republic of Estonia and a member of the European System of Central Banks.
The primary objective of Eesti Pank is to contribute to price stability within the euro area. This means keeping the annual consumer price growth in the euro area as a whole slightly below 2%. Price stability is the precondition for a strong economy. A stable price level is maintained with the help of the single monetary policy, which is formulated by all the Eurosystem members, including Eesti Pank. The latter is also responsible for the implementation of the euro area single monetary policy in Estonia.
Besides the price stability objective, Eesti Pank also contributes to achieving other economic policy goals in Estonia and in the euro area.
In addition, Eesti Pank fulfils the traditional functions of a central bank:
- manages currency circulation,
- supports and organises transfers between commercial banks,
- participates in safeguarding financial stability,
- manages the foreign reserves of Estonia,
- prepares financial sector statistics and balance of payments statistics,
- advises the government in economic policy issues of Estonia and of the euro area.
Financial Supervision Authority
National financial supervision is performed by the Financial Supervision Authority. 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.
State budget
The state budget is a one year plan of the state for receiving revenues and maxing expenditures. Constitutional institutions and government agencies, on this basis use the resources received by the state for realising different policies. As of the year 2017 the state budget is drawn up according to the accrual method of accounting, which means that the state budget records all important monetary and non-monetary obligations and rights of the state. As of the year 2020 the budget of the government and the areas of jurisdiction of the ministries will be activity based: every Euro is connected with services offered to a concrete inhabitant or institution and every Euro aids in achieving a certain aim. An activity based budget helps state authorities to provide and develop services more efficiently. Services are linked into programmes bundled with the state’s long-term development aims.
The compiling of the state budget for the following financial year starts at the end of the preceding financial year and takes place during the current financial year together with the renewal of the state’s four year budget strategy. The detailed calculations required for planning are done by the areas of jurisdiction of the ministries and constitutional institutions, based on established aims, with the coordination of the Ministry of Finance. The government presents the following year’s draft state budget to the Riigikogu by the latest on the 1st of October. The Riigikogu can make changes to the draft and passes it as an act.
The state budget accepted by the Riigikogu has a largely generalised level, according to the role of the Riigikogu as an influencer of the state’s long-term development and the creator of the legal framework required for the development. The approved state budget is then again broken down into detailed financial plans, which are followed by the areas of jurisdiction of ministries, the government, Government Office and constitutional institutions in their activities.
The most important legal principles of the state budget are stipulated in the constitution, with the remainder in the State Budget Act and the regulations issued based on it. The state’s mid long-term development plans with financing, are described in the state’s budget strategy as a single document and in greater detail in development plans of the fields.
The state budget revenues mainly come from state taxes, duties, fees, fines and mandatory insurance payments stipulated by law. A significant part of the state budget revenue is formed by the support from the European Union budget. The expenditure side of the state budget, in addition to the state’s operational expenditures and investments, includes shares of the state budget allocated to municipal governments, support given from the state budget and the state’s international obligations.
Laws
- State Budget Act
- Riigikogu Rules of Procedure and Internal Rules Act
- Bank of Estonia (Eesti Pank) Act
- State Assets Act
- Taxation Act