The Ministry of Agriculture, with the participation of financial institutions, is discussing the possibility of changing the mechanism for subsidizing interest rates on loans and leasing by allocating budget funds to the amount of funds raised by financial institutions to finance agriculture. This was announced by the Minister of Agriculture of the Republic of Kazakhstan Yerbol Karashukeyev in response to a deputy's request regarding the direction of subsidies directly to financial institutions within the framework of the subsidy mechanism for agricultural entities.
"With this approach, the volume of subsidies will be formed depending on the volume of lending and leasing in the agricultural sector. The subsidy funds will be sent directly to the financial institution without the participation of local executive bodies, and the final borrower receives a cheaper loan," the head of the Ministry of Agriculture explained.
At the same time, according to him, it is necessary to provide mechanisms to minimize the following risks:
1. Risk of losses in case of non-receipt of subsidies. Loans of JSC "Agrarian Credit Corporation" and leasing of JSC "KazAgroFinance" are provided for up to 10 years. At the same time, the republican budget is formed for a 3-year period. It is necessary to work out a legislative mechanism to guarantee the receipt of subsidies, including providing for leveling the risks of changes in the subsidy policy in the future, budget sequestration.
2. The risk of external auditors recognizing losses of financial institutions when issuing cheapened long-term loans in accordance with international financial reporting standards.
3. The risk of stagnation or decrease in the volume of lending to the agro-industrial complex. If the subsidy mechanism is changed, financial institutions are highly likely to limit the volume of lending at the expense of their own and borrowed funds to the limits provided for in the subsidies budget, and proportionally reduce them with a decrease in the volume of budget subsidies.
4. The risk of reducing bank lending to the agro-industrial complex. If the subsidy mechanism is changed, where the guarantees of receiving subsidies will apply only to the financial institutions of the Baiterek holding, it will lead to the fact that loans from second-tier banks will become less attractive.
This, in turn, will strengthen the role of the state in lending to the agro-industrial complex, which contradicts the decree of the head of state dated March 10, 2023 "On measures to expand lending to the real sector of the economy and reduce the creditworthiness of the population", which provides for the need to take measures to increase bank lending to the agro-industrial complex.
"In this regard, the study of the issue of paying subsidies directly to financial institutions will continue, taking into account the need to minimize the above risks," Karashukeev informed.