The Armenian government announced on Tuesday plans to start gradually introducing next year a national system of agricultural insurance increasingly seen as a vital necessity for struggling farmers across the country.
Thousands of low-income villagers lose their crops each year due to hailstorms, droughts and other natural disasters. They receive little compensation from the cash-strapped government.
According to Deputy Agriculture Minister Armen Harutiunian, the government will launch at the end of 2018 a pilot project that will insure some farmers growing fruits, vegetables or cereals against one or two types of risks. The government will subsidize insurance premiums with a special 10 million-euro ($11.8 million) fund set up for that purpose, he said.
Germany’s state-owned development bank KfW will contribute half of that money through a grant allocated to the Armenian Finance Ministry. The two sides signed a relevant agreement in Yerevan on Monday at a ceremony attended by Prime Minister Karen Karapetian.
“During the first year the [agricultural insurance] bureau will select the main risks and the main crops for the pilot project,” Harutiunian told a news conference. “In the first phase there will be [insurance coverage for] maybe one or two risks and several crops: vegetables or cereals. We will test the system within that framework and see which model works best.”
Harutiunian said that the government is inclined to prioritize hailstorms as the number one natural risk. He also announced that the Central Bank of Armenia, which is also involved in the effort, is already “working with” private insurance firms. The latter are interested in the scheme despite the high risks involved, added the official.
Harutiunian could not say which rural areas will be first covered by the agricultural insurance program and whether it will be mandatory or optional for local farmers. The insurance bureau will work out these and other details in the coming months, he explained.
Some farmers cautiously welcomed the government plans while warning that agricultural insurance will not work if it places a heavy financial burden on them. They also said that it must not be mandatory.
“It all depends on the amount of premiums,” Haykaz Asatrian, a grape farmer from the southeastern Vayots Dzor province, told RFE/RL’s Armenian service (Azatutyun.am). “Right now villagers finance 90 percent of their agricultural work with loans [extended by commercial banks.] If they had cash they would already be able to buy insurance.”