Interest Rates on Agricultural Loans Eliminated and Co-Financing Introduced

The government has adopted the second measure to neutralize the economic consequences of the coronavirus, which pertains to the agricultural sector. Minister of Economy Tigran Khachaturyan noted that this tool is aimed at both individuals and legal entities employed in the agricultural sector.

“With this, we are eliminating all interest rates that have been established by various programs in the agricultural sector until now. For example, we had an instrument for supporting leasing financing, where we subsidized interest rates by 2-4 percent. We are now eliminating those interest rates. Moreover, the government previously subsidized 12 percent down to 7 percent, and farmers paid 5 percent; now we are eliminating that as well. Next, we are stating that we will also subsidize the interest rates on loans that farmers agree to take in foreign currency,” said the minister.

He added that there is an important new aspect regarding microloans. “If banks subsidize microloans of up to 1 million drams with a 13 percent interest rate for a period of 2 years, we will subsidize all the interest rates. This means that agricultural entities will have loans of up to 1 million drams without interest, regardless of their field of activity,” he stated.

He also mentioned that the next step concerns cooperation. According to him, if agricultural entities agree to combine their efforts to create agricultural cooperatives, the government will not only subsidize the interest rates but will significantly co-finance those programs. “This means that agricultural entities can present less collateral. The government’s co-financing will be in the range of 30-70 percent. For instance, if a cooperative decides to engage in livestock breeding, the government’s co-financing will be 70 percent. This means that if they want to take a loan of 200 million drams, they only need to provide collateral of 60 million drams, the rest will be covered by the government. If agricultural raw materials need to be purchased, the government’s co-financing will be 30 percent; for hail protection nets, intensive orchards, and modern irrigation systems, it will be 50 percent; and for general-purpose projects, it will be 10 percent,” added the minister.

Prime Minister Nikol Pashinyan stated that this is a clear example of the government viewing the crisis as an opportunity. “This is about drastically changing the quality and quantity of our agriculture. I consider this a historic opportunity. We must seriously engage in this work and succeed,” he said.

Deputy Prime Minister Mher Grigoryan also noted that the co-financing mechanism is very serious and cannot fail to work. He stated that he has not seen such steps taken in any country. The government is taking risks, and agriculture must develop through this initiative.