Cotton Farms Need Debt Write-off

The government in Tajikistan is setting up a management centre to help cotton farmers pay off their enormous debts, but NBCentralAsia observers say farms can only be saved from complete insolvency by suspending loan repayments or writing off their debts.



From May 1, a new management centre will start working towards a solution to the cotton farming crisis in Tajikistan by looking into why farms accrue such enormous debts, according to an Aziya Plus news agency report on April 20.



Cotton is Tajikistan’s largest and most problematic agricultural sector. Most cotton farms in the country depend on “futures loans” which take future harvests as collateral.



According to the ministry of agriculture, farmers now owe an estimated 400 million US dollars and the revenue gained from selling cotton on doesn’t even come close to covering the costs.



Shukrullo Rahimnazarov, deputy agriculture minister, told NBCentralAsia that export revenue from cotton was around 100 million dollars last year, and the government is eager to find a way out of the deficit crisis.



“The World Bank has allocated 12 million US dollars to develop mechanisms for paying off debts, and these will be tested as pilot projects in five districts. If it proves effective, it could be applied in all other districts,” he said.



NBCentralAsia experts believe the financial burden should be taken on by the state, and warn that unless it writes off the arrears, most cotton growers will face bankruptcy in the future.



Vahob Vahidov, head of agricultural development at the Institute of Economics at the ministry for trade and economics, says debt and interest payments should be suspended for five years to give farmers the chance to recover.



“But the state should be directly involved as a regulator [to make sure] the situation doesn’t go on and on,” he said.



Vahidov says the state could compel banks to give farmers loans on soft terms, helping them to up productivity and pay off their debts as their income rises.



Independent economist Sodik Ismoilzoda also suggests the authorities prove that cotton farming is actually profitable by managing 10-15 per cent of the total land used to grow it.



“The state itself should show that the sector can be profitable. It should also stop [farmers] signing agreements with futures companies, so as to save the sector.”



Futures companies have funded the costs of spring sowing since the mid-Nineties. At the end of the year they take whole harvests that were put down as collateral. Even this often doest not cover the loan sum, leaving farmers with enormous debts and high interest payments – and nothing to sell.



NBCentralAsia economic expert Hojimuhammad Umarov says the debts should be completely written off with government assistance.



“No farmer could pay off what he owes in a hundred years,” he said, adding that futures company loans are a disaster from the start because they provide equipment, fuel and seeds “as profiteers, tripling the price”.



(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)