Agricultural finance and institutional reforms in Romania

The financial system for agriculture in Romania currently includes banks (s tate and private-owned), small credit co-operatives and a Rural Credit Guar antee Fund. During 1990-1996, the state-owned Banca Agricola, together with the Ministry of Agriculture and Food, channelled funds for the agricultura l sector through integrators (monopolistic para-statal organisations); the expressed aim was supplying producers, mainly state owned commercial compan ies, with cheap credit. Other subsidies were granted for inputs (seeds, fer tilisers), and for price support for wheat, milk and meat. Since 1997, agri cultural policies have changed substantially and the financing patterns hav e changed accordingly. The largest part of Government support for agricultu re, about 60%, is directed in a transparent fashion to the private sector t hrough a voucher system. Free vouchers are distributed to all private lando wners according to their land area and are used to purchase inputs. they co ver 10-30% of the minimal cost per hectare. Other subsidies, substantially lower in terms of volume as compared to the previous period, are granted fo r wheat storage, purchase for domestic consumption, maize exports, certifie d seeds, land reclamation and irrigation. There are also interest rate subs idies for short and medium-term credits. Problems in access to credit for p rivate agricultural households/enterprises are an important factor resultin g in a high degree of self-financing of agricultural activity and low inves tment.