Financial and credit regulation of the agricultural sector: the experience of Ukraine under war conditions

Размещено на http://www.allbest.ru/

National Science Center «Institute of Agrarian Economics»

Financial and credit regulation of the agricultural sector: the experience of Ukraine under war conditions

Radchenko O.D.

Introduction

Financial and credit regulation of the agricultural sector is an activity of state authorities as part of agricultural policy. Such regulation is carried out through the use of a comprehensive mechanism of organizational, legal and economic measures for managing the financial resources of agricultural enterprises and the industry, providing conditions for ensuring food security, reproduction of the country's agricultural potential, development of forms of management and their production, social and financial potential. The mechanism of financial and credit regulation is carried out through a systemic set of market financial instruments: classic financing by types and sources, the latest financing instruments, state and international financial support, lending and insurance.

Under martial law, the role and significance of individual instruments of financial and credit regulation changes, both in role and in scope. Therefore, it is important to study the essence and conditions of development.

As a significant component of agricultural policy, financial and credit regulation of the agricultural sector is in the area of attention of scientists. Researchers highlight different aspects of this process. Thus, Hohol (2018) reveals the features of state regulation of the development of rural areas in Ukraine; Holian, & Zastavnyi (2020) analyze the priorities and instruments of financial and economic regulation of agricultural production; Horbatiuk & Chebotarov (2023) describe the initial basis of state regulation of the post-war development of regional agri-food subcomplexes; Hrei (2023) explores the directions and methods of the system of state regulation of the agricultural sector of the economy; Ostapenko (2021) analyzes theoretical approaches to the formation of the economic foundations of state regulation of the agricultural sector in Ukraine; Ibatullin, Hryvkivska, & Svynous (2023) reveal the features of the formation of a food market monitoring system in the context of state regulation of food supply to the country's population; Katan & Dobrovolska (2018) show financial and credit state regulation of the agro-industrial complex in the structure of the functions of the financial mechanism; Konovalchuk & Kovalov (2023) analyze the features of state regulation and support for the agricultural sector of the Ukrainian economy under martial law; Kopytko & Kopytko (2023) talk about increasing the efficiency of state regulation of the agricultural sector of the agro-industrial complex in the war and post-war period; Lunkina & Kuhliar (2023) analyze lending to the agricultural sector of the Ukrainian economy; Petliuk & Miedviedkova (2021) show government support in ensuring the development of the agricultural sector of the Ukrainian economy; Radchenko, Aleskerova & Todosiichuk (2018) revealed the credit aspects of financial agricultural relations etc.

Especially for the research of the agricultural economy and the potential of the current National Science Center «Institute of Agrarian Economics»: Humeniuk, Shpykuliak, Nemish, & Shelenko (2023); Shpykuliak, Pugachov, Hryschenko, & Ksenofontova (2023); Tulush & Samoshkina (2023); Lupenko, Khodakivska, Nechyporenko, & Shpykuliak (2022); Andros (2019); Tomashuk & Tomashuk (2021); Radchenko, Kalivoshko & Leontovych (2023) etc.

Presentation of the main material

Violation of economic proportions and chains of formation of added value of the industry brings to the fore the role of the state in financial regulation measures. Accordingly, this implies an increase in the state's share in the economy (the average share of government spending in GDP), because the higher this indicator, the higher the possibility of centralized regulation, especially during a crisis period.

For the agricultural sector of the economy, this indicator can be determined through the Index of Agrarian Orientation of the Economy, which is calculated as the share of spending on the agricultural sector in government spending, divided by the share of agriculture in GDP. The assessment of this indicator depends on the level of budget expenditures, and since their volumes were systematically reduced and practically ceased during martial law, the Agricultural Orientation Index decreased from 0.157 in 2013 to 0.102 in 2022 (Fig. 1).

Fig. 1. Dynamics of the index of agrarian orientation and overall profitability of the agricultural economy of Ukraine for 2013-2022, %

Comparing this indicator with the dynamics of profitability for the same period, we observe that government participation grows in proportion to the decrease in profitability. That is, the conclusion is confirmed that the state undertakes to regulate the income of producers in unfavorable periods.

An assessment of the factors supporting the financial balance of the agricultural sector during the period of martial law indicates that in 2022, the volume of financial resources of agricultural enterprises according to financial statements amounted to UAH 1,441 billion (USD 49.3 billion), which is 7.2% higher than pre-war 2021 y (1344 billion UAH) and by 55.8% of the average annual value for 2013-2021. (925 billion UAH) (Table 1).

Table 1. Dynamics and structure of financial resources agricultural sector of Ukraine for 2021-2022, million UAH

However, the growth of resources under the conditions of the introduction of martial law in 2022 is conditional in nature, since it is based on the value of noncurrent resources and/or equity capital, which have not depreciated during the year of war due to the balanced state financial policy. The growth is primarily due to an increase in current assets by 11%, an increase in the volume of long-term and current liabilities by 15% in 2022 against the level of 2021.

In general, the conditional cost of financial resources involved in creating a unit of added value in the industry in 2022 is 3.29 UAH, while in 2021 it was 2.33 UAH (an increase of 41%), and for the 9-year period - 3.06 UAH (growth 7.5%). This figure was higher only in 2016 - UAH 5.68, due to a decrease in the level of lending and a significant increase in the dollar exchange rate, which led to the need to increase working capital and current liabilities.

For a more accurate analysis, deeper samples by factors are needed, a significantly larger lag by year of at least 15 years, but statistical and analytical data closed for the period of martial law prevents such analysis for the future. In a state of war, the analysis of the influence of factors should be expanded and supplemented with indicators characterizing the level of support: food security, income of commodity producers, social security, infrastructure, sales markets, etc. Forecast scenarios for the need for financial resources for the agricultural sector of Ukraine in the conditions of post-war reconstruction (Table 2).

Table 2. Forecast scenarios of the need for financial resources

Probably, due to the trend of indicators since 2018, the annual increase in agricultural airborne forces from 2023 will be UAH 126 billion, budget support will be reduced by UAH 1.9 billion, lending will increase by UAH 13 billion, price regulation will decrease by UAH 1.07 billion UAH will be reduced by UAH 7.8 billion, capital accumulation will increase by UAH 6.4 billion annually.

According to the Ministry of Agriculture, in 2023, the government extended the State program “Affordable loans 5-7-9%” to facilitate farmers' access to loans under martial law and the program for providing state guarantees until 2024. The Program was implemented by the Ministry of Finance of Ukraine through authorized banks with the participation of the Entrepreneurship Development Fund in accordance with the Procedure for providing financial state support to business entities, approved by Resolution of the Cabinet of Ministers of Ukraine dated January 24, 2020 No. 28. Accordingly, during 2023, almost 14 thousand farms

received 78.8 billion UAH. bank loans for development (of which, under the state program “Affordable loans 5-7-9%” for UAH 44.5 billion) (Minagro, 2024).

Innovative types of financial instruments for state regulation of the agricultural sector during martial law are given in Table 3.

Table 3. Possible sources of fund financing post-war recovery of the agricultural sector of Ukraine

Source: based on data from Radchenko, Kalivoshko & Leontovych (2023)

Given that the state budget is focused exclusively on national security needs, support for the agricultural sector is provided at the expense of Ukraine's international partners. The data on them is not systematized, financing is scattered according to sources and areas of expenditure. Thus, in 2022, more than UAH 1.5 billion was allocated to the project “Program “Accelerating Private Investments in Agriculture”, of which UAH 1.4 billion was an advance of a World Bank loan, the rest of the subvention distributed in 2021 for the development of comprehensive spatial plans development of community territories and costs for the formation and operation of a system of gratuitous assistance. Within the framework of the government project “Work”, non-repayable grants are provided for 6 programs: for micro-business; for the expansion or creation of enterprises in the field of processing; for planting gardens; for the construction of new greenhouses; for start-ups in IT; for training in the field of information technology with a total cost of up to 3 billion UAH. There are USAID programs for agrarian and rural development (AGRO) worth 35 million dollars for producers, especially those affected by the war; the project "Credit resources for agricultural producers "cost $8.9 million; "Agricultural Sustainability Initiative in Ukraine", worth $100 million, to strengthen mechanisms for the export of Ukrainian agricultural products, etc. According to these sources, support amounts to UAH 7.6 billion, but not all program funds are intended for financing in 2022.

Conclusions

Thus, financial regulation of the agricultural sector is aimed at increasing its financial resources and financial potential. According to estimates, in conditions of martial law, in terms of total resources, the financial potential as of the end of 2022 will probably reach UAH 2251.6 billion (USD 76.98 billion), which is more by 5% than in 2021 and by 67% of the average value for the period 2013-2021 Under the conditions in force before the full-scale invasion, the expected growth, calculated based on the growth rate of equity capital in 2013-2021, could be 16%, that is, as a result of the war, the industry lost at least 230 billion UAH (7.8 dollars) financial resources. Finding sources to cover this gap is the task of the current financial policy for the agricultural sector. financial credit agrarian

To implement the strategic goals and objectives that wartime challenges pose to the agricultural sector, its financial mechanism needs to transform methods, tools and levers. They must solve the problems of stabilizing financial capital, sufficient volumes of financial resources to reproduce production and ensure food security, the growth of agricultural investments during the war and post-war period, as well as entry into the EU financial system through the components of the financial market and special programs of state and international support.

Maintaining economic activity and post-war reconstruction requires the use of all resources, but the most important and decisive are public finances and/or those generated with the participation of the state. Therefore, the state's share in the wartime economy and post-war renewal is growing. Regarding support for production and post-war restoration of the agricultural sector, hope is placed on international donor support. As a country that has received the status of a candidate for EU membership, Ukraine has the opportunity to receive financial assistance under the Pre-Accession Assistance Instruments through grants, investments, technical assistance, participation in EU programs and initiatives.

References

1. Golyan, V. A., & Zastavnyi, Yu. B. (2020). Financial and economic regulation of agricultural production: priorities and tools. Agrosvit, 3, 20-26.

2. Hohol, T. V. (2018). State regulation of the development of rural areas of Ukraine: theory, methodology, practice: monograph. National Acad. state example under the President of Ukraine. Kamianets-Podilskyi: D. G. Zvoleyko. [in Ukrainian].

3. Horbatiuk, L. M., & Chebotarov, Ye. V. (2023). Basic principles of state regulation of the post-war development of regional agro-food subcomplexes. Economic Herald of Donbass. № 1(71).

4. Hrei, V.Yu. (2023). Directions and methods of the system of state regulation of the agricultural sector of the economy. State Formation, 1(33), 84-90.

5. Humeniuk M., Shpykuliak O., Nemish D., & Shelenko D. (2023). Institutionalization of state support for the development of small agrarian entrepreneurship under martial law: regional aspect. Herald of Agrarian Science. 11 (848), 67-76.

6. Ibatullin, M. I., Hryvkivska, O. V., & Svynous, N. I. (2023). Formation of the food market monitoring system in the context of state regulation of food provision of the country's population. Agrosvit, 3-4, 89-96.

7. Katan, L. I., Dobrovolska, O. V. (2018). Financial and credit state regulation of agricultural industry in the structure of functions of the financial mechanism. Interaction of banks and other financial institutions with enterprises: theory, methodology and practical reality: monograph / by General ed. L. I. Katan and N. I. Demchuk. Dnipro: Porogy.

8. Konovalchuk, I. S., & Kovalov, V. H. (2023). Peculiarities of state regulation and support of the agrarian sector of the Ukrainian economy under martial law conditions. Taurian Scientific Bulletin. Series: Public management and administration, (5), 27-33.

9. Kopytko, V., & Kopytko, O. (2023). Increasing the effectiveness of state regulation of the agrarian sector of the agricultural sector in the war and post-war period. Economy and society, 52.

10. Lunkina, T. I., & Kuhliar, A. A. (2023). Lending to the agricultural sector of the economy of Ukraine. Modern Economics, 39(2023), 99-103.

11. Lupenko Yu., Khodakivska O., Nechyporenko O., & Shpykuliak O. (2022). The state and trends of agricultural development in the structure of the national economy of Ukraine. Scientific Horizons, vol. 25, 6, 121-128.

12. Lupenko, Yu.O., & Andros, S.V. (2019). Bank lending to agricultural sector of the economy. Economic newsletter of NTUU "Kyiv Polytechnic" Institute". 16.

13. Ministry of Agrarian Policy and Food of Ukraine. 2024.

14. Ostapenko, S. (2021), “Theoretical approaches to economic principles formulation regarding state regulation of the agricultural sector in Ukraine”, Efektyvna ekonomika, [Online], vol. 11.

15. Petliuk, L. O., & Miedviedkova, N. S. (2021). State support in ensuring the development of the agricultural sector of the economy of Ukraine. Economy and the state, 2, 105-111.

16. Radchenko O. D., Aleskerova Yu. V., Todosiichuk V. L. (2018). Credit aspects of state support for the development of the agricultural sector of Ukraine. Economy. Finances. Management: topical issues of science and practice. 11 (39), 84-94.

17. Radchenko, О., Kalivoshko, О., Leontovych, S. (2023). Financial regulation mechanism the Ukrainian economy under martial law: a review of policies and instruments. Transformation of economics, finance and management in the context of world globalization : Scientific monograph. State University of Jan Kochanowski. Riga, Latvia: “Baltija Publishing”, рр. 118-142.

18. Shpykuliak, O., Pugachov, M., Hryschenko, O., & Ksenofontova, K. (2023). Assessment of the Effectiveness of Development of Agrarian Entrepreneurship in Modern Economic Conditions: Aspects of Wartime and Post-War Recovery. Electronic scientific journal of economic sciences “Modern Economics”, 41, 170-178.

19. Tomashuk, I., & Tomashuk, I. (2021). Theoretical and organizational aspects of the crediting mechanism of agricultural enterprises. Economic discourse, (3-4), 64-78.

20. Tomashuk, I. (2021). Theoretical aspects of the essence of bank credit and features of credit relations in the agricultural sector of the economy. Ekonomika APK, 28(5), 101-112.

21. Tulush, L., & Samoshkina O. (2023). The transformation of the financial mechanism of the state support for the agricultural sector under the military influence. Characteristics and trends of socio-economic development at the macro-and micro-levels : Scientific monograph. Publishing House “Baltija Publishing”, рр. 94-99.

Размещено на Allbest.ru