Estonia’s chief auditor says €1bn in state COVID-19 loans issued haphazardly

Estonia’s chief auditor says €1bn in state COVID-19 loans issued haphazardly
By Linas Jegelevicius in Vilnius December 3, 2020

Estonia’s National Audit Office (Riigikontroll) unveiled on December 3 the results of an audit tasked with looking into how a billion euros of COVID-19 relief in extraordinary loans and guarantees were allocated during the coronavirus pandemic.

The audit authority claims that state agency KredEx's criteria and objectives in allocating COVID-19 relief loans and guarantees during the coronavirus pandemic have been opaque.

Auditor general Janar Holm noted that large sums of money and a lack of clear direction were a recipe for problems.

In its overview, the audit office found that as the KredEx loans that followed the supplementary state budget set up in response to the first wave of the pandemic were vague in their intentions, further distribution of loans and guarantees will need significantly clearer rules to ensure equal treatment of target group enterprises, and the best use of public money.

Among its criticisms, the audit office said it remains unclear how businesses get ministerial approval for loan applications, which sometimes happened even before the company submitted a KredEx application.

For instance, the government approved shipping line Tallink's €100mn loan (Tallink had initially sought €150mn) the day after the terms and conditions of the KredEx measure entered into force, i.e. before it was actually implemented.

In the Tallink case, the company should have needed more time to consider its proposals, even by KredExes' own guidelines, the office found.

A €39.4mn loan given to a part-completed real estate project in Tallinn's harbor area, known as the Porto Franco development, was in KredExes' own eyes a reputational risk.

The deal was criticised since Porto Franco is an unfinished construction project; the coronavirus state aid was in principle supposed to go to existing businesses that could prove they had been hit hard, directly as a result of the pandemic and related regulations.

Even after the Porto Franco loan was approved, other potential applicants from the real estate field found terms restricting what could and couldn't be eligible, the audit office says.