TALLINN - Estonia is to repay a 50 million euro ($73.69 million) loan to Swedish Swedbank this year, ahead of the due date of June 2011, so it can save on interest payments, the finance ministry said on Thursday.
The loan was originally aimed at supporting state budget liquidity.
'Cash flow and liquidity are adequate for the coming months to cope with the disbursement of government expenditure, ' Finance Minister Jurgen Ligi said in a statement.
'This decision reflects the strength of fiscal policy in Estonia. We think we can pay back the loan before the deadline at a time when the majority of countries would rather borrow.'
Estonia expects its GDP to fall by 14.5 percent this year and has already made savings of 19 billion kroons to the public sector budget in a bid to keep its finances on an even keel.
The ministry said that repaying the loan early would save the state 45 million kroons ($4.24 million) in interest costs.
The loan's interest rate was priced at six-month Euribor with a 2.75-percent margin and was originally due to be repaid by June 2011.
The finance ministry said in a separate statement that its stabilisation reserve, a pot of cash the government has drawn on to get it through the downturn, was 3.88 billion kroons ($365.5 million) ($373 mln) at the end of the third quarter, down 45.3 percent from the 7.1 billion at the end of second quarter.
The reserve has allowed Estonia to avoid sharply rising deficits and meant it has been able to stay on course for euro adoption, which it hopes will be in 2011.
The fall in the reserves in the second quarter was due to parliament's approval in June to use 3.5 billion kroons before August 1 to reduce general economic risks, the ministry added.
Reporting by David Mardiste, editing by Patrick Graham