Abstract
This 2009 Article IV Consultation highlights that the credit-fueled boom has resulted in a relatively large nonfinancial private sector debt stock in Estonia. With declining incomes, unemployment increasing sharply, and asset prices depressed, balance sheets of households and firms are under strain, weighing on domestic demand. Nonperforming loans have increased to more than 6 percent of total, and some banks are reporting losses. Executive Directors have supported the authorities’ aim toward speedy adoption of the euro, noting its effects in fostering stability and confidence.
Appendix I. Estonia: Fund Relations1
(As of September 30, 2009)
Membership Status: Joined May 26, 1992; Article VIII.
General Resources Account:
| SDR Million | Percent of Quota | |
|---|---|---|
| Quota | 65.20 | 100.00 |
| Fund holdings of currency | 65.19 | 99.99 |
| Reserve position in Fund | 0.01 | 0.01 |
| SDR Million | Percent of Quota | |
|---|---|---|
| Quota | 65.20 | 100.00 |
| Fund holdings of currency | 65.19 | 99.99 |
| Reserve position in Fund | 0.01 | 0.01 |
SDR Department:
| SDR Million | Percent of Allocation | |
|---|---|---|
| Holdings | 62.03 | 100.1 |
| SDR Million | Percent of Allocation | |
|---|---|---|
| Holdings | 62.03 | 100.1 |
Outstanding Purchases and Loans: None
Financial Arrangements: None
Projected Obligations to Fund: None
Exchange Rate Arrangements:
The currency of Estonia is the kroon. The kroon replaced the ruble on June 20, 1992. Since that date, the Bank of Estonia has guaranteed the conversion of kroon bank notes, coins, and reserve deposits of commercial banks at a fixed rate of exchange of EEK 15.6466 per euro (and EEK 8 per deutsche mark until 31 December, 2001). The de facto exchange rate regime is a “currency board arrangement,” which corresponds to the de jure classification. Estonia has accepted the obligations under Article VIII, Sections 2(a), 3, and 4 of the Fund’s Articles of Agreement, and maintains an exchange system free of restrictions on the making of payments and transfers for current international transactions, except for those imposed for security reasons in accordance with the European Council Regulations set forth in the letter from the Bank of Estonia dated July 9, 2008, and notified to the Executive Board in accordance with Decision No. 144-(52/51) (EBD/08/73, July 9, 2008).
Article IV Consultation:
The 2008 Article IV consultation was concluded by the Executive Board on March 2, 2009.
FSAP and ROSCs:
A review under the Financial Sector Assessment Program (FSAP) was completed at the time of the 2000 Article IV Consultation. Further Reports on Observance of Standards and Codes (ROSC) modules were discussed in the 2001 Article IV Consultations and updated during the 2002 Consultation. A FAD mission concluded a fiscal transparency ROSC in January 2009 and an FSAP update was completed in February 2009. MONEYVAL conducted its evaluation of Estonia’s AML/CFT framework in February 2008. The executive summary of the report is being rewritten in the ROSC format and will be circulated to the Board in the near future
Technical Assistance:
Technical Assistance from the Fund, 2000–09
Technical Assistance from the Fund, 2000–09
| DEPT | Project | Action | Timing | Counterpart |
| FAD | Pension Reform | Mission | April 2000 | Ministries of Finance and Social Affairs |
| MAE | Banking Supervision | Staff Visit | December 2000 | Bank of Estonia |
| FAD | Tax Policy | Mission | March 2001 | Ministry of Finance |
| INS | Financial Markets | Training | September 2002 | Bank of Estonia |
| FAD | Medium-term Budget | Technical Assistance | December 2003 | Ministry of Finance |
| FAD | Tax Reform | Technical Assistance | February 2005 | Ministry of Finance |
| FAD | Tax Reform | Technical Assistance | October 2009 | Ministry of Finance |
Technical Assistance from the Fund, 2000–09
| DEPT | Project | Action | Timing | Counterpart |
| FAD | Pension Reform | Mission | April 2000 | Ministries of Finance and Social Affairs |
| MAE | Banking Supervision | Staff Visit | December 2000 | Bank of Estonia |
| FAD | Tax Policy | Mission | March 2001 | Ministry of Finance |
| INS | Financial Markets | Training | September 2002 | Bank of Estonia |
| FAD | Medium-term Budget | Technical Assistance | December 2003 | Ministry of Finance |
| FAD | Tax Reform | Technical Assistance | February 2005 | Ministry of Finance |
| FAD | Tax Reform | Technical Assistance | October 2009 | Ministry of Finance |
Appendix II. Estonia: Statistical Issues
1. Data provision to the Fund is generally adequate for surveillance purposes. A May 2001 data ROSC mission found that the quality of macroeconomic statistics was generally good. The 2009 fiscal transparency ROSC indicated that Estonia now meets nearly all of the requirements of the transparency code, and approaches best international practice in some areas.
2. Estonia is a subscriber to the Special Data Dissemination Standard (SDDS). Also, the Bank of Estonia (BoE) and the Statistical Office of Estonia (SE) periodically update on their websites a wide variety of data on the key variables for the monetary, fiscal, real, and external sectors.
3. As a member of the European Union and a candidate to join the European Monetary Union, Estonia has markedly upgraded its statistics to comply with European Central Bank (ECB) standards and regulations.
A. Monetary and Financial Statistics
4. The BoE regularly reports monetary data with minimal delay. The data are also published by the BoE on its website. The BoE balance-sheet data (base money and net international reserves) are reported monthly, and are available on the eighth day of the following month. Broad money and its components are available monthly from the BoE on the thirteenth banking day from the beginning of the month. Interest rate updates on domestic and foreign currency transactions are provided monthly on the seventeenth banking day of the month.
5. BoE has adopted the framework of the ECB for the compilation of monetary and financial statistics, which is consistent with the IMF’s Monetary and Financial Statistics Manual. STA and BoE have completed the data work on mapping Estonia’s monetary data into the Standardized Report Forms which have been published in the June issue of the IFS Supplement.
6. Aggregate financial data are compiled by the BoE and reported on a monthly basis. Data for individual banks are also available on a quarterly basis, and consolidated data on commercial bank reserves, NFAs, and net open foreign exchange positions are available on the eleventh banking day of the month. Commercial bank off-balance sheet data, leverage and liquidity ratios, and short term external debt are available on the eighteenth banking day of the month. Average capital adequacy ratios are available on the thirteenth banking day of the month. Data on non-performing loans are available on the seventeenth banking day of the month.
7. Estonia participated in the Fund’s Coordinated Compilation Exercise for Financial Soundness Indicators and regularly provides a large number of FSIs.
B. Balance of Payments Statistics
8. Quarterly balance of payments and IIP data are compiled by the BoE. Daily exchange rate data are available with a one working day lag. Monthly import/export data are available with a two month lag. Quarterly balance of payments and public and private external debt data are available with a quarterly lag.
C. Government Finance Statistics
9. All fiscal data are published by the Ministry of Finance (MoF). Historical data are also available on SE’s website.
Monthly central government operations data are available with a lag of up to 25 days after the end of the month. The government began reporting monthly data on a consolidated government basis in January 1999 on its Estonian-language web site. Quarterly data on foreign loans and guarantees by the central government are published in Estonian with a monthly lag. The MoF is using one of its two allowed SDDS flexibility options on the timeliness of monthly central government operations data, and have recently started to disseminate these data on the National Summary Data Page.
Comprehensive annual data on central and local government operations (cash basis) are reported in the GFS Yearbook. These data include a statement of operations and the government balance sheet, including data on financial assets and liabilities, both domestic and foreign. Quarterly data for general government, based on the GFSM 2001 framework, are now regularly reported for inclusion in the International Finance Statistics.
D. National Accounts
10. Data on GDP (quarterly, by semester, and annually) are published by SE with a lag of three months after the end of the quarter. Flash estimates of aggregate GDP are available two months after the end of the reference period. The monthly CPI is available seven days after the end of the reference period. Monthly PPI and export price indices are available four weeks after the end of the reference period. Monthly indicators of retail trade, industrial output, industrial sales, are reported approximately six weeks to two months after the end of the reference period. Nominal monthly wage data and quarterly nominal and real wage data are published with a two-month lag.
Estonia: Table of Common Indicators Required for Surveillance
(As of December 10, 2009)
Any reserve assets that are pledged or otherwise encumbered should be specified separately.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition.
Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); Not Available (NA).
Reflects the assessment provided in the data ROSC published on November 6, 2001 and based on the findings of the mission that took place during May 10-18, 2001 for the dataset corresponding to the variable in each row. For fiscal, also takes account of the 2009 Fiscal Transparency ROSC. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), or not observed (NO).
Same as footnote 7, except referring to international standards concerning (respectively) source data, statistical techniques, assessment and validation, and revision studies.
Includes external gross financial asset and liability positions vis-à-vis nonresidents.
Estonia: Table of Common Indicators Required for Surveillance
(As of December 10, 2009)
| Date of latest observation | Date received | Frequency of Data6 | Frequency of Reporting6 | Frequency of publication6 | Memo Items: | ||
|---|---|---|---|---|---|---|---|
| Data Quality – Methodological soundness7 | Data Quality – Accuracy and reliability8 | ||||||
| Exchange Rates | Dec 9, 2009 | 12/10/09 | D | D | D | ||
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | Nov 2009 | 12/07/09 | M | M | M | ||
| Reserves/Base Money | Nov 2009 | 12/07/09 | M | M | M | O, LO, LO, LO | O, O, O, NA |
| Broad Money | Oct 2009 | 11/24/09 | M | M | M | ||
| Central Bank Balance Sheet | Oct. 2009 | 11/24/09 | M | M | M | ||
| Consolidated Balance Sheet of the Banking System | Oct. 2009 | 11/24/09 | M | M | M | ||
| Interest Rates2 | Dec 9, 2009 | 12/10/09 | D | W | W | ||
| Consumer Price Index | Nov 2009 | 12/07/09 | M | M | M | O, O, O, O | LO, LO, O, LO |
| Revenue, Expenditure, Balance and Composition of Financing3 – General Government4 | Aug 2009 | 9/30/09 | M | M | M | LO, LO, O, O | LO, LO, O, NO |
| Revenue, Expenditure, Balance and Composition of Financing3 – Central Government | Aug 2009 | 9/30/09 | M | M | M | ||
| Stocks of Central Government and Central Government-Guaranteed Debt5 | Q2 2009 | 8/30/09 | Q | Q | Q | ||
| External Current Account Balance | Q3 2009 | 12/9/09 | Q | Q | Q | O, O, LO, O | O, O, O, O |
| Exports and Imports of Goods and Services | Sept. 2009 | 11/23/09 | M | M | M | ||
| GDP/GNP | Q3 2009 | 12/09/09 | Q | Q | Q | O, O, O, LO | LO, LO, LO, LNO |
| Gross External Debt | Q2 2009 | 09/15/09 | Q | Q | Q | ||
| International Investment Position9 | Q2 2009 | 09/15/09 | Q | Q | Q | ||
Any reserve assets that are pledged or otherwise encumbered should be specified separately.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition.
Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); Not Available (NA).
Reflects the assessment provided in the data ROSC published on November 6, 2001 and based on the findings of the mission that took place during May 10-18, 2001 for the dataset corresponding to the variable in each row. For fiscal, also takes account of the 2009 Fiscal Transparency ROSC. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), or not observed (NO).
Same as footnote 7, except referring to international standards concerning (respectively) source data, statistical techniques, assessment and validation, and revision studies.
Includes external gross financial asset and liability positions vis-à-vis nonresidents.
Estonia: Table of Common Indicators Required for Surveillance
(As of December 10, 2009)
| Date of latest observation | Date received | Frequency of Data6 | Frequency of Reporting6 | Frequency of publication6 | Memo Items: | ||
|---|---|---|---|---|---|---|---|
| Data Quality – Methodological soundness7 | Data Quality – Accuracy and reliability8 | ||||||
| Exchange Rates | Dec 9, 2009 | 12/10/09 | D | D | D | ||
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | Nov 2009 | 12/07/09 | M | M | M | ||
| Reserves/Base Money | Nov 2009 | 12/07/09 | M | M | M | O, LO, LO, LO | O, O, O, NA |
| Broad Money | Oct 2009 | 11/24/09 | M | M | M | ||
| Central Bank Balance Sheet | Oct. 2009 | 11/24/09 | M | M | M | ||
| Consolidated Balance Sheet of the Banking System | Oct. 2009 | 11/24/09 | M | M | M | ||
| Interest Rates2 | Dec 9, 2009 | 12/10/09 | D | W | W | ||
| Consumer Price Index | Nov 2009 | 12/07/09 | M | M | M | O, O, O, O | LO, LO, O, LO |
| Revenue, Expenditure, Balance and Composition of Financing3 – General Government4 | Aug 2009 | 9/30/09 | M | M | M | LO, LO, O, O | LO, LO, O, NO |
| Revenue, Expenditure, Balance and Composition of Financing3 – Central Government | Aug 2009 | 9/30/09 | M | M | M | ||
| Stocks of Central Government and Central Government-Guaranteed Debt5 | Q2 2009 | 8/30/09 | Q | Q | Q | ||
| External Current Account Balance | Q3 2009 | 12/9/09 | Q | Q | Q | O, O, LO, O | O, O, O, O |
| Exports and Imports of Goods and Services | Sept. 2009 | 11/23/09 | M | M | M | ||
| GDP/GNP | Q3 2009 | 12/09/09 | Q | Q | Q | O, O, O, LO | LO, LO, LO, LNO |
| Gross External Debt | Q2 2009 | 09/15/09 | Q | Q | Q | ||
| International Investment Position9 | Q2 2009 | 09/15/09 | Q | Q | Q | ||
Any reserve assets that are pledged or otherwise encumbered should be specified separately.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition.
Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); Not Available (NA).
Reflects the assessment provided in the data ROSC published on November 6, 2001 and based on the findings of the mission that took place during May 10-18, 2001 for the dataset corresponding to the variable in each row. For fiscal, also takes account of the 2009 Fiscal Transparency ROSC. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), or not observed (NO).
Same as footnote 7, except referring to international standards concerning (respectively) source data, statistical techniques, assessment and validation, and revision studies.
Includes external gross financial asset and liability positions vis-à-vis nonresidents.
Updated information relating to members’ positions in the Fund can be found on the IMF web site (http://www.imf.org/external/np/fin/tad/exfin1.aspx).