Newsletter Issue No. 122 | December 2018

Challenges to agricultural budget support policy

Over the last years, Ukraine’s agri-food sector demon-strated resilient growth and developed into a key source of foreign exchange for the economy. In 2017, it accounted for 14.5% of GDP and more than 42% of total goods exports. This positive development came against a significant reduction in the volume of agri-cultural budget support over the recent years. The structure of the support also changed, moving from tax benefits to direct support in the form of input sub-sidies. However, the way the direct support pro-grammes are designed and implemented, as well as the negative effects of input subsidies on efficiency and productivity, raise serious concerns about their sustainability and effectiveness. A more targeted and modern approach is needed in order to address the current major problems of the sector (shortage of workers and financial constraints) under severe fiscal constraints facing the country.

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