Estonia to borrow from Swedbank, EIB, use reserves

Estonia has hit a deep recession and has struggled to find ways to finance its budget deficit, which it wants to keep under the European Union level of 3 percent of gross domestic product (GDP) so it can adopt the euro in 2011. We have a budget deficit of three percent, this is one of the means to cover the deficit," Prime Minister Andrus Ansip told a news conference, when asked about the Swedbank loan.

Estonia has no government debt market and has followed a conservative policy in borrowing since the fall of the former Soviet Union in 1991. Most of its loans have come from multilateral lenders. Finance Minister Ivari Padar said the Swedbank loan was offered at Euribor plus 2.75 percent.

The government said in a statement it planned to borrow 2.35 billion kroons from Swedbank with a maturity up to two years and 4.15 billion from the EIB with a maturity up to 15 years. The money from the EIB is part of an earlier loan application for 8.6 billion kroons from the EIB.

The government that funds from the EIB will be used for co-financing European Union structural fund projects and construction of roads. It also said it would take 3.5 billion kroons from budget reserves the country has built up over the years. The reserves amounted to 7.33 billion at the end of March. Using the money will require approval from parliament.

The use of reserves' resources is quickly needed as the conditions of the economic fall have lowered budgetary revenue and increased expenditure," the Finance Ministry said in a statement. Most Popular on Reuters Chrysler files for bankruptcy; inks Fiat deal Video Redstone says U.S.

Source http://reuters.com/article/rbssfinancialservicesandrealestat~

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