Functions and activities
The Fiscal Council is an independent advisory council whose task is to assess the state’s official economic forecasts and the compliance of Estonia’s public finances with domestic and European Union fiscal rules.
The economic forecasts underlying the formulation of the state’s fiscal policy are prepared by the Ministry of Finance twice a year, in spring and summer, and consist of two components: a macroeconomic forecast and a fiscal forecast. Within two weeks of its publication, the Fiscal Council is required to give its endorsement of the macroeconomic forecast and its assessment of the fiscal forecast. In addition, the Fiscal Council must assess the macroeconomic forecast and its underlying assumptions included in the state’s medium-term fiscal-structural plan before it is submitted to the European Commission. Every three years, the Fiscal Council prepares a retrospective analysis of the accuracy of the Ministry of Finance’s forecasts.
The main domestic fiscal rule in Estonia is the general government structural balance rule. Each autumn, on the basis of the state budget strategy, the Fiscal Council assesses the government’s targets for the structural budgetary position for the following four years. After the end of the fiscal year, the Fiscal Council assesses whether the actual structural budgetary position was in line with the target set. In its assessments, the Fiscal Council is guided by the requirements of the structural balance rule and the need to improve the budgetary position, but it does not make recommendations on the revenue or expenditure measures through which this should be achieved. Every four years, the Fiscal Council prepares a more comprehensive review of the functioning of the domestic fiscal framework.
With the reform of the EU economic governance framework in 2024, the net expenditure growth indicator was placed at the centre of the European Union’s fiscal rules, and the mandate of fiscal councils was expanded to include oversight of this indicator. Accordingly, the Fiscal Council assesses the government’s net expenditure growth targets whenever a new medium-term fiscal-structural plan is being prepared. In addition, if required, the Fiscal Council assesses the actual net expenditure growth of the previous fiscal year in spring.
The opinions of the Fiscal Council are public and are published as reports on the Fiscal Council’s website. In addition, the Fiscal Council regularly presents its opinions at meetings held with domestic stakeholders (such as the government, the Finance Committee of the Riigikogu, the Ministry of Finance and the Supervisory Board of Eesti Pank) and international stakeholders (such as the European Commission, the IMF, the OECD and rating agencies). If the government or the Ministry of Finance does not take the opinion of the Fiscal Council into account, it must provide a public explanation.
