For more than two years, during the period of Russia's full-scale war against Ukraine, the agricultural land market has shown steady growth. The value of land has increased by 10%, which is equivalent to an increase in potential collateral of $5.5 billion. Taking into account the liquidity ratio of agricultural enterprises of 0.35, this increase could provide owners and the agricultural sector with additional loans worth $1.9 billion. Information is provided in the Land Market Review for the fourth quarter of 2023.
At the end of 2023, the volume of bank debt in the agricultural sector was approximately $3.5 billion. Thus, the active use of land as collateral could significantly expand financing opportunities for the agricultural sector and landowners.
With the opening of the land market to legal entities from January 1 of this year, a further increase in land values of approximately 40% is expected, which will lead to an increase in the capitalization of the land market to almost $50 billion. This will open up the potential for attracting loans in the amount of up to $17.5 billion.
This approach can help reduce the financing gap in the Ukrainian agricultural sector, which is about $21 billion, and address the needs for short-term financing, as well as investments in reconstruction, recovery, and development.
Additional market development and increased transparency will contribute to an increase in the land liquidity ratio, bringing it closer to the level of developed countries, which will automatically expand the volume of possible lending.
