OREANDA-NEWS. March 10, 2009. As a result of the annual discussions of Estonia's economic situation and outlooks (the so-called Article IV consultations) at the IMF, the fund commended Estonia's economic policy steps taken so far and the decisive measures applied in strengthening crisis management frameworks, reported the press-centre of Eesti Pank.

"One of the most significant points of the report is that the IMF reaffirmed once again our currency board arrangement and the fixed exchange rate of the kroon serve as the pillars of the country's monetary policy and financial stability. This system will be maintained until Estonia joins the euro area," said Governor of Eesti Pank Andres Lipstok.

"The IMF emphasises that against the background of prospective EMU accession, it is important to meet the Maastricht fiscal criterion. The IMF encourages the authorities to achieve a fiscal surplus over the medium term. Eesti Pank has also urged the government to obtain this goal, both earlier and in its latest economic policy statement, and this objective needs to be taken into account in the preparation of the budget for 2010 and for the next years," he added.

Lipstok stressed that the IMF underscored the importance of improving regional collaboration through the coordination of supervisory activities and exchange of information. "Thus the IMF welcomes the recent precautionary liquidity provision arrangement concluded between the Estonian and Swedish central bank. In addition to the strong liquidity position and the integration of our banking sector with European and Scandinavian banking groups, this arrangement serves as an additional guarantee in ensuring financial stability and restoring confidence," Governor of Eesti Pank said.

According to Lipstok, the Estonian government and the central bank take the IMF's recommendations with utmost seriousness.

"In the ongoing global turmoil, Estonia is able to rely on the fiscal buffers accumulated in more favourable times, as well as on the strong banking sector and efficient financial supervision. The continuously stable financial environment and measures enhancing the flexibility and credibility of the economy help us cope with the economic downswing," Lipstok said. Therefore, he added, it should be highlighted the IMF supports Estonia's new Employment Contract Law adopted at the beginning of 2009, since it raises flexibility in the labour market and improves the social safety net.

According to the IMF, the fast convergence of the Estonian economy towards average EU levels and the integration with the European single market are praiseworthy. Although the global economic and financial crisis means the country is facing several challenges, Estonia's economic vulnerabilities have markedly decreased. Price hikes have inhibited and the current account deficit is narrowing, making Estonia less dependent on external financing.