New Harvest Could Be Without Cash
Viktor Yushchenko’s Cabinet, after declaring the principle of “living on what we earn,” attempted to change something long since established and seemingly unchangeable: rather than traditional state budget subsidies, it proposed a new pattern of credit for the agricultural producer.
The new pattern, concerning the spring campaign, can be explained as follows. The Ministry of Agricultural Policy will provide loans to the countryside via commercial banks in the amount of UAH 600 million. Simultaneously, UAH 250-300 million is to be set aside in the 2000 budget program debt service to banks crediting the agro-industrial sector. This will allow the agricultural producer to repay the loan principal plus inflation and interest. The new pattern, however, will have a long way to go to become reality.
Last week, the National Bank hosted a joint meeting of the managers of thirty leading commercial banks and ministry officials to discuss rural funding problems. Among other things, it transpired that there are no legal vehicles providing bank credit repayment guarantees. According to Yaroslav Soltys, deputy chairman of the NBU board, agricultural producers’ bank liabilities currently register UAH 1.7 billion. Mr. Soltys stressed that the banks do not accept land as collateral.
Mykola TYTARENKO, head of the loans department, Forum Bank, said this about the situation:
“It’s good to have a rural credit pattern; previously, commercial banks were simply ordered to finance agriculture. Now the approach is more realistic. When providing loans, we consider a given enterprise’s financial status in the first place. In the case of agricultural entities, this status cannot be properly analyzed; whatever documents you study reveal debts running into millions of hryvnias, so that even 20-25% profitability is a godsend. Hence crediting the agrarian sector can only be regarded as the government’s pressing current necessity; as for the commercial bank, the expedience of this pattern remains to be clarified.”
There is another credit option: emission.The NBU press service announced that the National Bank will not resort to emission unless totally secured, and nor is it planning any.
INCIDENTALLY
The Cabinet called on the managers of “nongovernmental” agricultural enterprises being reorganized to do their best to make priority debt payments to business entities supplying “material-technical resources.” This is how a statement reads on joint action in the agro-industrial sector in 2000, signed by the government and representatives of business structures, reports Interfax Ukraine. The Cabinet requested creditors to restructure liabilities on terms and conditions set forth in bilateral agreements, without accruing or applying penalties. Commercial creditors are proposed to use the amount payable as a contribution when setting up new enterprises jointly with debtors, the latter being enterprises in the process of reorganization as private business entities. The government also suggested that leased plots be used to pay off such debts.
