Agriculture in Ukraine

By Anton Usov

$20 million facility to local farms will improve land cultivation, increase output

The EBRD is providing a $20 million loan to the agricultural sector in Ukraine to help boost farming productivity and bring back unused arable land into production. Primary agriculture is a potentially key sector in the Ukrainian economy but as in many countries in eastern Europe it has suffered from underinvestment.

The project is part of the Bank’s work towards reducing the cost of food by helping boost agricultural output and restoring production on unused land in the region.

The Bank is providing the facility to UkrFarm Funding Limited, and the proceeds will be on-lent to some 60 agricultural companies located across the country. UkrFarm is fully owned by the Ukrainian Agrarian Farms Ltd. (UAFL) - a registered holding in which Renaissance Group holds the majority stake.

The facility will provide funds for both pre- and post harvest financing and will be accompanied by agricultural machinery purchases. The facility envisages annual additional return of up to 57 thousand hectares of currently unused arable land to cultivation.

Gilles Mettetal, EBRD Director for Agribusiness, said: “This project supports the development of modern primary agriculture in Ukraine – a key sector in the national economy, which is likely to lead the country’s post-crisis revival”.

Alexander Kostenko, CEO of UAFL, added: “EBRD investment and support will enable our company to enhance our land bank utilisation significantly, reaching 220,000 hectares in 2011 and providing greater employment for Ukrainian farmers, whose most important source of income is the land they own.”

The project will contribute to UAFL farms’ and the national output growth, thus increasing competition both domestically and in the export market. At a national level, it will help boost Ukraine’s position as an agricultural commodity exporter, especially in the light of its recent WTO accession.

In the agribusiness sector alone, the EBRD has directly committed more than €5.5 billion in over 380 projects across central and eastern Europe and the Commonwealth of Independent States since 1991. The European Bank for Reconstruction and Development is the largest financial investor in Ukraine. As of 1 April 2010, it had committed over €5.0 billion through 197 projects.