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International investors will be able to buy agricultural land in Ukraine by 2020

Newly elected Ukrainian Prime Minister Oleksiy Honcharuk has pledged to liberalise the land market in Ukraine by the middle of 2020 with a option to purchase farmland by foreigners

Newly elected Ukrainian Prime Minister Oleksiy Honcharuk has pledged to liberalise the land market in Ukraine by the middle of 2020.

"We emphasise that we will model [the land market liberalisation] so that nobody loses land, so that people become richer as a result of this reform, and not vice versa. We will carefully approach planning, and the market will be introduced when we are ready for this, and we plan to do this in the middle of next year.".

However, the same day, Ukrainian President Volodymyr Zelenskiy ordered a bill on the farmland market to be drawn up and to be submitted to the nation's parliament, the Verkhovna Rada, by October 1, annulling a moratorium on the sale of land by the same date.

The president also appointed Honcharuk and Minister of Economic Development, Trade and Agriculture Tymofiy Mylovanov responsible for the execution of the order.

“Large holdings’ resource is cheaper now. Smaller holdings have а more expensive resource; they cannot buy this land. We need to give a small farmer the opportunity to get a loan at a much lower credit rate so that he is on par with foreign entities or would even be in better conditions. We plan to create an instrument that would compensate this interest rate,” Honcharuk explained.

He also added that before starting the land reform in summer 2020, the government together with the National Bank would make lending in Ukrainian currency cheaper, and the loan could be taken at 14-15%. Credit conditions for land purchase will be more favorable for the Ukrainian compared to the foreigner.

"Access to the purchase of land should be given to all those who can cultivate it: Ukrainian natural persons, legal entities and foreigners, but only if the legal entity is registered in Ukraine and pays taxes" he noted.

Honcharuk stressed that his team had already developed 25 scenarios for opening the land market and calculated the conditions under which GDP would grow to maximum. If it is 1%, Ukraine will receive plus 600 million dollars in the budget.

Investment Agriculture Ukraine

In December 2018, the nation's parliament, the Verkhovna Rada, extended the moratorium on the sale of agricultural land until January 1, 2020. Ukraine keeps extending the moratorium on the sale of agricultural land despite the high priority the International Monetary Fund (IMF) gives to creating a land market.

The IMF said in its staff report published in October 2016 that while Ukraine has a vast area of arable land, use of this land is currently limited by legislation, restricting private owners' ability to sell their land to more efficient users and constraining the use of land as loan collateral.

"Amending the legislation to unlock land-related transactions would generate significant economic gains, including higher incomes and greater tax revenues. New legislation on agricultural land sales is expected to be submitted by end-September 2016," the IMF wrote.

In May, Ukraine's Prime Minister Volodymyr Groysman said the Ukrainian cabinet will allow sales of agriculture land only to individuals with Ukrainian citizenship and up to a maximum of 200 hectares of land per person.

On August 8, Zelenskiy also said that as a result of large-scale privatisation, effective investors would receive hundreds of interesting objects. "We will conduct large-scale privatisation and sell hundreds of interesting objects to effective investors, create normal competitive rules in the energy markets and simplify the rules of doing business removing restrictions," Zelenskiy underlined.

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