Kazakhstan’s Ministry of Agriculture Does Not Plan to Change the Coupon Interest Subsidy Mechanism

The Ministry Considers the Subsidy Mechanism One of the Key Instruments for Agricultural Development<img alt="МСХ РК не планирует менять механизм субсидирования купонного вознаграждения" src="/upload/medialibrary/f96/0fck9act13qyq2ihqbb27qm4vbuuvabk/MWxHNd9rMGFenC2hppeQ.webp" title="МСХ РК не планирует менять механизм субсидирования купонного вознаграждения" align="middle">The Ministry of Agriculture of Kazakhstan is not considering any changes to the current mechanism for subsidizing coupon interest payments in the agro-industrial sector. The ministry regards this instrument as one of the most effective and balanced methods of supporting agricultural producers, allowing private investment to be attracted while maintaining affordable financing conditions for farmers. This was stated by Minister of Agriculture Aidarbek Saparov during a plenary session of the Senate.

According to him, budget lending could serve as an alternative. However, in order to reduce the burden on the state budget, the mechanism of subsidizing coupon interest on bond loans was selected, enabling the attraction of significant off-budget resources for the agricultural sector.

Through this mechanism, approximately KZT 700 billion was allocated to finance spring fieldwork and harvesting campaigns. As a result, around 8,000 agricultural producers received support, and financing covered approximately 8.5 million hectares of cultivated land. Of the recipients, 96% were small businesses, 3% medium-sized businesses, and 1% large enterprises.

The minister noted that every one tenge of budget funds attracted an additional five tenge of commercial financing. As a result, agricultural producers gained access to preferential loans at an annual interest rate of 5% for periods ranging from one year to fifteen months. This ensured the timely implementation of seasonal agricultural activities, including the purchase of quality seeds, mineral fertilizers, and crop protection products.

According to the Ministry of Agriculture, the subsidy mechanism has been one of the factors contributing to record harvests over the past two years. At the same time, efforts continued to diversify cropping patterns. During this period, wheat acreage was reduced by 1 million hectares to 12.1 million hectares, while oilseed crop acreage increased by 1.1 million hectares to 4.1 million hectares and pulse crop acreage expanded by 300,000 hectares to 800,000 hectares.

Export revenues from the agro-industrial sector reached USD 7 billion, or approximately KZT 3.5 trillion. The ministry notes that every KZT 1 trillion of concessional lending generates up to KZT 15 trillion in gross agricultural output.

The ministry also believes that transferring part of the coupon interest payment obligations to Agrarian Credit Corporation JSC and KazAgroFinance JSC would increase their financial expenses. Ultimately, this could raise borrowing costs for agricultural producers and reduce the availability of concessional financing.

Aidarbek Saparov also recalled that, under the Law on State Property and the Budget Code, quasi-public companies, including Agrarian Credit Corporation and KazAgroFinance, transfer at least 70% of their profits to the state budget in the form of dividends. As a result, the profits generated by these organizations are returned to the national economy and used, among other purposes, to support the further development of agriculture.

Source: <a href="https://agrosearch.kz/en/news/msx-rk-ne-planiruet-menyat-mexanizm-subsidirovaniya-kuponnogo-voznagrazdeniya">https://agrosearch.kz/en/news/msx-rk-ne-planiruet-menyat-mexanizm-subsidirovaniya-kuponnogo-voznagrazde.</a>