News
IMF: Estonia can accede to euro at present
exchange rate in 2011 / 23-01-2010
BNS - The International Monetary Fund (IMF) Friday said that
Estonia's 2011 euro adoption plans appeared in reach at the existing
exchange rate, Reuters reported.
"Following
recent budget measures and assuming continued fiscal consolidation
efforts, Estonia could meet all Maastricht criteria, while the
policy record to date provides assurances for continued
stability-oriented policies," the IMF said in a statement.
"Seeking euro adoption at the current fixed exchange rate parity
remains the best exchange rate policy for Estonia," the IMF said.
A repegging of the kroon at a more depreciated level would be
unnecessarily disruptive, both for Estonia and tghe region," Reuters
reported IMF as saying.
Although the IMF Executive Board noted the earlier assessment that
the effective exchange rate of the Estonian kroon was somewhat
overvalued, they underscored the need for continued structural
reforms to restore competitiveness.
Estonia still has some room for further expenditure cuts, but the
Directors stressed the importance of protecting social safety nets.
This calls for adjustment on the revenue side, particularly
broadening the tax base and eliminating poorly targeted expemtions.
IMF said that attention had to be turned to the opportunity of
ensuring restructuring of loans and cooperation between finacial
sector supervisory bodies at the regional level.
IMF also warned that the fall in prices and wages and rise of the
interest level in the euro zone would make for more strenuous
servicing of loans.
The Directors also reommended amending the corporate tax code to
discourage excessive debt accumulation at the firm level.
"The report supports our budget policy choices and we share the view
that structural changes for improving the position must be continue.
For example raising of the pension age and abolition of special
pensions which the government has already decided, and we are also
handling abolition of the return of the housing loan interests,"
Finance Minister Jurgen Ligi said in comment on the IMF statement on
Friday.
Bank of Estonia Govenor Andres Lipstok said that it deserved to
point out the IMF opinion that a certain growth in bad loans would
not bring any significant risks for the financial stability of the
state.
Source: investinestonia.com