On the eve of the largest in the Baltic States trade fair for food and agriculture AgroBalt 2005 the editorial of the journal Business and Exhibitions asked Minister of Agriculture Kazimira Danute PRUNSKIENE to share her views about some of the most important issues in the field of agriculture.

Gediminas BANAITIS, Deputy Director

Programme of the Government of the Republic of Lithuania for 2004-2008 envisages "to strengthen the economic and manufacturing potential of the agricultural sector by investments and other effective structural instruments, to foster and promote the competitiveness of producers in domestic and foreign markets".
After Lithuania has acceded the European Union, UAB Rural Credit Guarantee Fund works hard in implementing this programme regulation particularly in increasing investment. The primary goal of the fund is providing an opportunity for economic entities not having enough property to be used as mortgage to receive a bank credit for financing investment projects and for ensuring the purchase of surplus agricultural produce. In implementing this goal, the fund receives more and more clients, offers more diverse services and reduces the guarantee risk.
During seven years of its functioning, the fund has issued 1150,6 million litas guarantees to banks for 1239 million litas of credits.
For instance, in 2004 Rural Credit Guarantee Fund extended 163 guarantees to banks for 99.9 million litas, of which 162 guarantees for 57.5 million litas were issued for credits granted to farmers, agricultural and cooperative enterprises, SMEs working in rural areas and agricultural processing companies. These economic entities used guarantees for 138.1 million litas of credits in 2004.
The major portion of guarantees is granted to investment projects launched by farmers and other businessmen working in rural areas. The number of entities using credits is growing, so do credit amounts.
Absorption of SAPARD financial support has greatly influenced the increasing demand for credits and guarantees. In 2004, 75 SAPARD aid applicants were issued with guarantees amounting to 42.7 million litas.
Credits with guarantees are mainly used for acquisition of equipment and introduction of new technologies.
Farmers very often take credits for everyday needs, like buying fertilizers, fuel and fodder. Last year, the fund issued even by 34 percent guarantees more than in 2003 for these purposes.
Year by year, we attach greater attention to young farmers under 40 years of age by extending the guarantee for up to 80 percent of the outstanding credit. Guarantees for 12.6 million litas were issued to 36 young farmers in 2004.
Credits with the fund guarantee are granted by all banks operating in Lithuania. So far, NORD/LB Lietuva, Vilniaus bankas and Hansabankas remain among the most active. Other banks also demonstrate no less interest in issuing credits under our guarantees this being the outcome of introduction of land, agricultural and rural development economic mechanisms.
In recent years, purchase prices and sale volumes of milk, cattle, pigs and poultry have edged up, more production is exported and significantly larger direct and compensational payments have been introduced. The aggregate of all these factors has had great influence over the farmers' income. Last year, farmers' income grew to 2.9 billion litas, although it made slightly over 1.5 billion litas in 2000 and 2 billion litas in 2003.
The apparent changes help farmers feel much safer in borrowing and banks - in giving credits.
Though the lack of money is absolutely evident, not all farmers use bank credits and guarantees of Rural Credit Guarantee Fund. By the number of submitted applications, the most active are farmers of Këdainiai, Joniðkis and Pakruojis districts.
Rural Credit Guarantee Fund also administers compensation of guarantee payment, insurance premiums and loan interest to guaranteed credit beneficiaries. 30 percent of loan interest is compensated for agricultural and economic entities engaged in alternative activities and 40 percent for young farmers. The compensation of 50 percent of loan interest is given when buying land and 60 percent - for young farmers.
Although the significant aid is expected to arrive from the EU funds in the period 2004-2006, credits will continue to be taken for the needs of investment. For instance, 686.4 million litas has been allocated to SPD priority Rural Development and Fisheries, 2.1 billion litas - for the rural development plan. SAPARD projects continue to be implemented.
In many cases, the support bears compensational character - compensations are given after buying services or equipment. The problem is that even large farms do not possess the required amount of own money, while the projects to be implemented are rather large. The initial analysis of applications for investment into agricultural land carried out by our experts shows that 42 percent of projects need more than 1 million litas each. 78 percent of aid recipients are farmers the majority of which does not have enough collateral, thus will need the assistance of both banks and Rural Credit Guarantee Fund to receive the said EU aid. Therefore, the Government has increased the guarantee limit by 60 million litas which totals 280 million litas in 2005.

UAB Rural Credit Guarantee Fund
Blindziu st. 17, LT-08111, Vilnius
Tel.: (370 5) 260 84 06
Fax: (370 5) 260 84 05
inof@garfondas.lt
www.garfondas.lt

Arunas SIMKUNAS, UAB Alfa Agro prekyba director

Raimonda KAROSAITE