Budget of Kyrgyzstan will save up to 1.5 billion soms thanks to abolition of benefits in import of pesticides and termination of subsidizing of interest rates on loans for farmers in commercial banks. The review of agricultural subsidies by the UNDP Biodiversity Finance Initiative (BIOFIN) says.
It is noted that a significant part of the budget funds is allocated to support agriculture in the Kyrgyz Republic. At the same time, according to the Organization for Economic Cooperation and Development (OECD), assistance can be potentially harmful to the environment and create a burden on the budget and taxpayers. The agricultural sector in the republic is largely exempt from taxes. Its tax burden is 1.2 percent. At the same time, the sector continues to receive large government subsidies.
According to the BIOFIN analysis, about 30 percent of the subsidies are potentially harmful to biodiversity.
«Subsidies do not encourage farmers to introduce green, or organic, farming practices. Many support measures operate simultaneously. Experts believe that it is necessary to streamline the benefits and do it at the lowest cost for vulnerable groups of the population,» the review says.
For example, imports of mineral fertilizers and pesticides are exempt from VAT in Kyrgyzstan. The loss of budget revenues is 700 million soms per year. However, the analysis of effectiveness of the benefit on the import of pesticides was not carried out. But use of pesticides can adversely affect human health and cause water pollution.
By canceling the subsidy, the country will be able to use the money for purchase of less toxic fertilizers. This will reduce the cost of agricultural products by 9 percent and increase profits by 8 percent.
Experts recommend abandoning subsidizing interest rates on loans for farmers. Environmental aspects are not taken into account when issuing loans under Financing of Agriculture Program.
The government is offered to attract a soft loan of $ 70 million at 0.5 percent per annum. This money can refinance state banks for issue of «green loans». Such projects should include an element of a grant for business projects for development of sustainable agriculture. It is proposed to cover this part at the expense of 700-800 million soms received after cancelation of the benefits.