Large Farm Debt in Ukraine

The present study analyzes the nature of Ukrainian farm debt by investigating whether the debt servicing problem of Ukrainian farms is more of a debt problem or a net income problem. Net income generation appears to be the more important underlying problem behind the debt problem. Second, the study recounts the main reasons for apparent farm losses in Ukraine. This analysis suggests that low profits are a result of public policies that reduce incentives for profit making, farm production of livestock products at a loss and lack of restructuring. The study concludes that the debt servicing problem of Ukrainian farms leaves them unable to utilize market instruments to secure seasonal financing and is the primary justification for the presence of the Ukrainian government in financing seasonal input supplies. Such financing creates a substantial burden on the state budget, and ultimately on taxpayers. It also leads to sizeable State claims on commodity markets that are similar to a continuation of the state order system for grain that was discontinued after 1997.