* Farmers says banks are reluctant to grant loans due to
* Currency depreciation has caused problems for Ukraine
* IFC says farmers first to get aid when banks stabilise
By Polina Devitt and Pavel Polityuk
MOSCOW/KIEV, April 29 Ukrainian farmers hope for
help from the International Monetary Fund as the country's
financial and political crisis has toughened lending conditions
during the key spring sowing campaign, farmers and bankers said.
Some farmers have been forced to use cheaper seeds or cut
the amount of fertilizer they can purchase while others have
struggled to get loans to replace old equipment.
"No matter who I've asked - nobody grants loans," said
Mykola Strigak, a farmer with 70 hectares of land in Kirovohrad
in central Ukraine. "They don't say they would not grant (the
loan), but they set conditions that could not be fulfilled."
Strigak, who wanted a loan to buy new machinery, said banks
asked for collateral worth more than twice the loan's value.
The IMF Board of Governors will meet on April 30 to consider
an aid package for Ukraine, one the world's key grain exporters.
"Once aid comes and the banking sector stabilises, the
agriculture sector will be the first to receive financing
because it's showing a sustainable growth," said Elena
Voloshina, head of the International Finance Corporation (IFC) -
the World Bank's private sector financing arm - in Ukraine.
The IMF tentatively agreed in late March to provide a $14
billion-$18 billion two-year aid package to help Ukraine recover
from months of political and economic turmoil.
IFC's Voloshina said local currency depreciation has
significantly affected banks. "They have problems now: credit
resources are short, limited and more expensive," she said.
Ukrainian banks are also having their own problems with
liquidity, said Vadim Bodaev, vice-president of the large
agricultural holding company AgroGeneration.
"We've applied to many banks and they say: 'Political
instability - let's wait'," Bodaev said. "This process can last
until Ukraine starts to receive Western finance, when the hope
for stabilisation would appear."
Strigak said his creditors were offering loans with an
annual rate of about 18 percent, which reaches 33 percent when
insurance and other costs are taken into account. This exceeds
his usual margin on crops of 30 percent.
Raiffeisen Bank Aval in Ukraine said that farmers were
mainly getting one-year loans in local currency with an annual
rate of between 20 and 25 percent.
UNSOWN LANDS, SHARED RISKS
According to the IFC's Voloshina, middle-sized companies
were the worst hit so far, while large companies were able to
raise loans and small farms continue to use their own cash.
"The amount of these accumulated resources looks adequate
for 2014. Critical may be the year of 2015, when the reserves
will be close to exhaustion," analysts at UkrAgroConsult said.
Voloshina said it appeared some land remained unsown because
of the financial problems farmers were facing.
Ukrainian analysts said in March farmers might leave about
20 percent of arable land unsown this spring due to a lack of
funds. They said a smaller area could reduce Ukraine's 2014
grain output by around 11 million tonnes.
Ukrainian farms have sown 4.7 million hectares of spring
grain as of April 28, or 56 percent of the expected sowing area,
the agriculture ministry said on Tuesday.
Most analysts expect the 2014 grain crop to be between 55
and 59 million tonnes, down from an all-time-high harvest of 63
million tonnes in 2013.
The IFC, which has invested around $800 million in Ukraine's
agricultural sector since 2004, runs an advisory program aimed
at increasing access to finance for Ukrainian farmers.
Participants in this sector - mainly farmers, banks and
suppliers of inputs like seeds, fertilisers - should seek
risk-sharing structures now, Voloshina said.
IFC together with the European Bank for Reconstruction and
Development (EBRD) are also promoting use of warehouse and crop
receipts in the sector, which would guarantee that a farmer
repays the loan in cash or product, she added.
(Additional reporting by Natalia Zinets in Kiev; Editing by
Nigel Hunt and Tom Heneghan)