Calculations by the Ministry of Finance show that Estonia's national debt will rise from 23.3 percent of gross domestic product (GDP) to 34.5 percent over the next three years.

This means a rise from €7.7 billion to €17.5 billion, the Fiscal Council estimates.

Last year, the average weighted interest rate on Estonia's national debt was 3 percent annually. With the decline of Euribor, it has fallen to 2.2 percent this year, but according to the Ministry of Finance, it is expected to rise again to around 3 percent by 2029.

The interest costs are estimated to reach €184 million in 2025, or 0.4 percent of GDP, according to the ministry.

However, the increased deficit will push up interest costs in the future to 0.9 percent of GDP by 2029.

According to the ministry's calculations, by 2029, Estonia will have to pay €464 million in interest on its national debt — €280 million, or 152 percent, more than this year.

In the budget strategy, the Ministry of Finance stresses the importance of reducing the budget deficit and curbing debt growth.

"More debt is costlier to service, creating new fiscal risks. Budgetary discipline is once again under the focus of rating agencies and markets, and the cost of borrowing will be determined by the outlook for public finances — as the debt burden grows, the country's credit rating falls and the cost of debt rises," the strategy states.

"It also reduces fiscal space and flexibility to respond to future shocks, creating the need in the next crisis to immediately respond with additional tax increases or spending cuts, which could exacerbate an already poor economic situation," the ministry notes.

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