Government officials said three Armenian commercial banks have already started offering farmers low-interest loans subsidized by the government.
Local banks have until now been very risk-averse in their dealings with the agricultural sector, which reportedly accounts for only 6 percent of their total credit portfolio. Their interest rates set for farmers have exceeded 20 percent per annum, making the repayment of agricultural loans extremely difficult. This is especially true now that the sector is reeling from last year’s bad weather that caused a sharp drop in Armenian agricultural output.
Speaking during a weekly cabinet meeting, Prime Minister Tigran Sarkisian said three banks have agreed to cut their lending rate to 14 percent. He said government subsidizes will enable farmers to borrow from them at 10 percent or even less. The interest rates will stand at 8 percent for residents of more than 200 rural communities, added Sarkisian.
Finance Minister Vache Gabrielian told journalists that the subsidized loans will not exceed 3 million drams ($8,100) and will be repayable in one year, with a six-moth grace period. He estimated that the scheme will inject up to 10 billion drams worth of cheap credit into a sector that generates approximately one-fifth of Armenia’s Gross Domestic Product.
The Armenian state budget for this year sets aside only 250 million drams for agricultural subsidies. Gabrielian said the government may seek to revise this figure upwards.
The subsidized lending was announced by the government less than a month after President Serzh Sarkisian instructed it to do more to tackle grave problems facing the mostly low-income farmers and, in particular, make loans more affordable for them.
Some opposition politicians and economists critical of the government have already downplayed the significance of the measure. “I’m sure that [cheaper] loans won’t save the village,” Artsvik Minasian, a parliament deputy from the opposition Armenian Revolutionary Federation (Dashnaktsutyun), said on Wednesday. He argued that more than 30,000 farmers are already struggling to repay agricultural loans.
Armenia -- Prime Minister Tigran Sarkisian meets with farmers in Avan village of Aragatsotn province, 22Mar2011
The Arminfo news agency quoted Minasian as saying that the government should instead substantially increase direct subsidies to villagers and exempt them from what he called exorbitant irrigation payments.
Prime Minister Sarkisian also announced on Thursday the launch of an “emergency agricultural aid service” to be provided by the Armenian Ministry of Agriculture and its regional structures. He said every farmer in need of urgent help will now be able to call up agriculture experts and receive advice from them free of charge.
“We will thus be able to summarize things every week and to understand what problems currently preoccupy our villagers,” explained Sarkisian.
The announcements made by him are the latest in a series of government measures designed to reverse the 2010 slump in agriculture which significantly slowed down Armenia’s economic recovery. Government officials say they should help the sector grow by 10 percent this year.
The government unveiled late last month a $21 million program to support livestock farming in 55 impoverished mountainous villages across the country. The bulk of the funding for its implementation will be provided by the World Bank.
The government has also purchased 2,000 tons of high-quality barley seeds from Ukraine and Russia that are due to be distributed to farmers in mostly mountainous villages. Barley is mainly used as animal fodder in Armenia.
In an apparently related development, Tigran Sarkisian dismissed three deputy ministers of agriculture on Thursday. The prime minister’s office said vaguely that they were relieved of their duties “in accordance with their own applications.”
The sackings came two days after Agriculture Minister Sergo Karapetian, who was appointed in December, publicly criticized the work of his ministry under his predecessors.