OREANDA-NEWS. November 03, 2009. The Estonian Finance Ministry has decided to return early to Swedbank a 50 million euro loan taken in May of this year.

The ministry said there is no need to keep the borrowed funds any longer.

According to Finance Minister Jurgen Ligi, the state's cash flows and liquidity will be sufficient in the coming months to cope with meeting budget expenditures.

"Even though taking a loan in 2010 and following years is likely, it is not expedient to keep the earlier loan in the state treasury just in case. All the more so as with the financial situation settling loan conditions will become more favorable," Ligi said.

The early repayment will save the state close to 45 million kroons (EUR 2.9 mln) in interest expense, the ministry said.

According to Ligi, the decision reflects the strength of Estonia's fiscal policy. "We can afford to repay a loan before it is due at a time when most countries are rather borrowing more," the minister said.

At the end of September the state treasury held 13.24 billion kroons' worth of liquid assets. The surplus of the state budget in the last three months has increased the amount of liquid assets as a result of which further borrowing in the near future is not expected to become necessary.

The interest on the Swedbank loan was based on the six-month Euribor plus 2.75 percent. Under the agreement the loan was to be repaid in June 2011.

The Finance Ministry will today inform Swedbank that the loan will be repaid on Nov. 12.