The Minister of Agriculture wants to write off a billion-dollar debt.
Alexey Pavlenko
At the end of March, bankruptcy proceedings began in Kyiv's Commercial Court against the Agency for Restructuring Agro-Industrial Enterprises, a subsidiary of the Ministry of Agrarian Policy. The debtor itself initiated the proceedings. The agency's bankruptcy petition stemmed from accounts payable of over UAH 1 billion, which the company is unable to repay.
The agency has been racking up an exorbitant debt for over a decade. This structure was created by the Cabinet of Ministers back in May 2003 (the corresponding decree was signed by then-Prime Minister Viktor Yanukovych) to transfer to a third-party entity the debts of the state-owned joint-stock company "Khlib Ukrainy," which were preventing it from becoming a significant player in the domestic grain market. Back in the early 90s, the Ministry of Agriculture received a nearly $59,5 million commodity loan under the Cabinet-guaranteed PL-480 program of the US Department of Agriculture. At the same time, our ministry's departments for grain products and feed industry received several loans from Ukreximbank totaling approximately $220 million UAH. The state joint-stock company "Khlib Ukrainy," created in 1996 on the basis of these departments, automatically assumed their debts. The company subsequently borrowed an additional $20 million from the same bank to purchase soybean meal. In 1998-1999, Khlib Ukrainy was also saddled with debts to the budget from Ukrnaftoprodukt (approximately $9 million) and UkrAgroPromBirzha (approximately $11 million). As a result, the debt of the Agency for the Restructuring of Agricultural Enterprises, which inherited these obligations, to the state budget as of 2012 amounted to almost 700 million hryvnias, according to the State Treasury Service. Taking into account penalties on loans, the total debt exceeded 996 million hryvnias. In 2012, the State Tax Inspectorate in Kyiv's Pechersky District filed a lawsuit in Kyiv's Commercial Court to recover this amount from the agency and won. The agency attempted to challenge this verdict, but in 2013, the Supreme Commercial Court upheld it, legitimizing the astronomical debt.
When establishing the Agency for Debt Restructuring in the Agricultural Sector, the Ministry of Agriculture's leadership stated that its brainchild would implement investment projects, including attracting foreign capital. However, in practice, the company has not implemented a single investment project.
It's noteworthy that when establishing the Agency for the Restructuring of Agricultural Debts, the Ministry of Agriculture's leadership claimed that its brainchild would implement investment projects, including attracting foreign capital. In 2011, the agency's head, Yuriy Malovichko, even joined the delegation led by then-President Viktor Yanukovych to a meeting with Israeli businessmen. However, in practice, the company never implemented a single investment project. A State Treasury report on the agency's financial audit conducted in 2013 concluded that its primary goal—recovering the debts of state-owned agricultural companies and generating profits—was never achieved. To address the problem, the auditors recommended that the Ministry of Agriculture replace the agency's leadership and coordinate a repayment schedule for loans taken out during the turbulent 90s with Ukreximbank, the Ministry of Finance, and the State Treasury. However, none of this was accomplished. Moreover, the agency's longtime head, Yuriy Malovychko, a former member of the Our Ukraine party who later became friends with Yanukovych-era Agrarian Minister Mykola Prysyazhnyuk, managed to hold on to his position under Svoboda's Ihor Shvaika and the current head of the Agrarian Agency, Oleksiy Pavlenko. Rumor has it that this was due to his accommodating nature, as well as the fact that the agency he headed no longer holds any value. According to DS, the debtor's current assets, including accounts receivable, amount to a paltry 11,4 million hryvnias. Consequently, it's easier to bury it by writing off its billion-dollar debt to the budget than to artificially keep it afloat by accumulating losses.
Published in the weekly newspaper "Business Capital" on April 13, 2015 (No. 15/725)
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