Ukraine agriculture: what to expect in 2017

Investing in Ukraine: Ukraine agriculture -- what to expect in 2017

According to Minister of Agrarian Policy and Food of Ukraine Taras Kutoviy, despite the fiscal deficit, the Ukraine state budget in 2017 provides for UAH 5.5 billion subsidies to Ukrainian agricultural producers, making up 1% of the agriculture gross product. These subsidies are intended to compensate for agricultural producers’ losses and to replace the special VAT treatment. The pool of funds is divided into 12 equal parts, which will be allocated throughout the year. The limit of UAH 2 billion is set to equalize the funds between market majors and small business.

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“The special VAT treatment was supposed to stay in effect throughout 2017. Actually, we save it through this compensatory scheme and therefore, we fulfill the promise given to the business to keep it until the end of 2017… Often we get a massage that we should support the entire industry. We have to support those who have a tough time, where there is a need to stabilize a situation or to give an impulse to growth”, the Minister believes.

Taras Kutoviy noted that there is no conflict with the International Monetary Fund requirements, as this scheme serves to define the state support for the industry, while this support is limited by the amount of subsidies.

“In addition, we formalized a support program for agricultural machinery manufacturing. By amendments to the Budget Code, we have this 1% fixed for five years. Each year, 10-15-20% of this percentage will be used for supporting the machinery manufacturing”, Kutoviy said.

There will be stronger support for Ukrainian agricultural producers due to credits granted by both the European Investment Bank and commercial banks. According to Kutoviy, the total sum of the loans may reach EUR 800 million, and the half of them is granted by the EIB. To obtain the credits, Ukrainian farmers have to offer good projects, and in order to help them, the Ministry launched the program “I want to be a farmer”. Its purpose is to support projects and products that will enable farmers to become a financial market participant. At least, at the expense of donors the state can help farmers make the financial statements for the banks, which offer the loans for the agrarian sector.

As for a sensitive issue of land market establishment in Ukraine, Kutoviy believes that its solving should be started from smaller steps: sales of land leasehold and increase in a land size, which may be owned by a Ukrainian citizen – up to 20 hectares. Until now, this plan haven’t received the IMF approval and, in spite of signing a memo on formation of the land market law, Kutoviy doubts there is any chance to adopt the law in the existing parliament.

“We created a working party, invited the World Bank and relevant associations. Within the national discussion, we want to discuss this problem and to understand attitudes in regions”, Kutoviy said.

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