Ukraine exceeded its own capabilities with the "5-7-9%" program

The National Bank of Ukraine recognized that the scale of the state program "Affordable Loans 5-7-9%" exceeded the capabilities of the state, so its conditions must be radically revised. According to the state regulator's regular report, the program played an important role after the start of the full-scale invasion, but at the moment its scale is too large for the country's budget.

In the first year of full-scale war, the Affordable Loans 5-7-9% program played an important role in supporting business, and during 2022-2023 the government amended the program 16 times. Mostly, credit limits were increased and the list of lending areas was expanded. Until now, the portfolio of loans subsidized by the program reached UAH 129 billion at the beginning of this June. At the same time, the cost of loans for customers remained low even during the period when market rates were rising. In this way, the program became more expensive for the state, because the state's debt for the payment of compensation for loans as of the beginning of June amounted to UAH 5.8 billion. At the same time, some banks formed more than 50% of their net hryvnia corporate portfolio at the expense of the program, while on average in the system this share is about a third.

Moreover, at a certain stage, the program began to subsidize not only clients, but also participating banks. It restrained price competition and reduction of lending rates by banks. In order to further improve the program, the National Bank of Ukraine proposes to gradually focus mainly on investment projects, and to provide loans for replenishment of working capital only to certain categories of clients. For example, the funds can be further provided to a business that has the potential to recover, but whose financial indicators due to war losses do not make it possible to service the loan on market terms. It is also possible to consider the possibility of limiting the total portfolio of loans under the program, taking into account the budget allocated to it.

We will remind you that earlier it was reported about the intentions of the Government of Ukraine in the current year to pay maximum attention to agricultural financing programs. For this reason, the list of state support programs has been expanded once again. As First Deputy Minister of Agrarian Policy and Food of Ukraine Taras Vysotskyi emphasized on this occasion, there will be 5 main programs this year. This is, first of all, "5-7-9 available loans". Under this program, agricultural producers can receive a loan of up to UAH 90 million, and processing enterprises - up to UAH 150 million. In addition, entrepreneurs cultivating up to 500 hectares can receive a loan guarantee through the Fund for Partial Guarantee of Loans in Agriculture. Thanks to this, the manufacturer can reduce the loan collateral by half. In addition, grants have been prepared for the development of gardens and greenhouses. Their size is up to UAH 7 million or UAH 10 million, respectively. These funds will be paid within a month after the approval of each project. Another program will be a project to compensate up to 50% of the cost of restoration and construction of reclamation systems. UAH 200 million has been allocated for this in the State Budget. And for compensation of up to 25% of the cost of domestic agricultural machinery, applications can be submitted as early as April.

In addition, the Cabinet of Ministers of Ukraine recently adopted a resolution on amendments to the Procedure for the use of funds provided for in the State Budget for providing support to farms and other producers of agricultural products. This Order was approved back in 2022. The new document expands the directions of state support for farmers registered in the State Agrarian Register. Payment amounts are also increasing. In particular, budget funds will be provided to farmers who cultivate up to 120 hectares of agricultural land. The amount of assistance has been increased from UAH 3,100 to UAH 4,000 per hectare. A separate budget subsidy was introduced for farmers from the de-occupied territories and those territories where hostilities have ended. They will receive UAH 8,000 per hectare.