Addressing a joint session of the Ukrainian Agrarian Confederation and the All-Ukrainian Union of Agricultural Entities on September 6, Prime Minister Anatoly Kinakh assured the audience the government would do its best to forestall “sluggish grain sales resulting from artificially low prices.” Saying this, he warned that those who hope to cash in on cheap purchases “are very, very mistaken.” The government plans to thwart grain sales at such prices by economic leverage. In particular, Mr. Kinakh pins great hopes on the results of a recent meeting of the representatives of thirty leading banks that took place at the National Bank. According to him, this meeting worked out a system of measures that will make it possible to channel at least UAH 1 billion in additional loans into the agrarian sector before the end of the month. A part of these will be used to purchase grain, which will allow bringing demand and supply into balance.
One of the most important areas of government activity in the current and subsequent years will be creation of an up-to-date system of agrarian credit. The premier said it is an “absolutely deformed” situation when there is a wide gap between the interest rates of the National Bank (17%) and commercial banks (over 30%). To bridge this gap, Mr. Kinakh said, the government is drafting a package of measures to streamline the monetary system. Incidentally, the discussants noted that one of this system’s elements, partial compensation for the interest rate of commercial bank loans issued to agricultural producers, is already playing a stimulating role. Calculations show that one hryvnia allocated to compensate for the interest rate made it possible for agriculture last year to get 16 hryvnias in credit, while this year the real value of such loans has dropped by an average 18%. The government is now exploring the possibility of applying this mechanism to insuring the harvests of grain and sugar beets as well as to leasing farming machinery.
As to the machines, some varieties of them, as Mr. Kinakh noted, have reached 90% of their service life. Thus the premier emphasized that this problem could not be solved quickly: there is a very difficult transition period ahead when we will have to use the potential of domestic farm machinery producers and in some cases resort to pure import (including that of used equipment, as has already been done this year) and leasing schemes. Mr. Kinakh announced that the 2002 state budget envisions a 20.4% rise in expenditures for the agricultural sector over those of this year.
