For more than two years, during the full-scale war between Russia and Ukraine, the agricultural land market has shown steady growth. The value of land 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 in the amount of 0.35, this increase could provide owners and the agricultural sector with additional loans in the amount of $1.9 billion. Information is provided in the overview of the land market for the fourth quarter of 2023.
By the end of 2023, the bank debt of the agricultural sector amounted to approximately 3.5 billion US dollars. Thus, the active use of land as collateral could significantly expand the possibilities of financing the agricultural sector and land owners.
With the opening of the land market for legal entities from January 1 of this year, a further increase in the value of land by 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.
Such an approach can help reduce the gap in financing of the Ukrainian agricultural sector, which is about $21 billion, and respond to the needs of short-term financing, as well as investments in reconstruction, restoration and development.
Additional development of the market and increasing its transparency will contribute to the growth of the land liquidity ratio, bringing it closer to the level of developed countries, which will automatically expand the scope of possible lending.
