International Monetary Fund Leverages COVID-19 Economic Fallout to Create a Land Market in Ukraine Despite Widespread Opposition
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May 21, 2020
Oakland, CA/Kiev, Ukraine — On April 28, 2020, President Volodymyr Zelensky signed a bill into law authorizing the sale of farmland in Ukraine, lifting a moratorium that has been in place since 2001. This bill is part of a series of policy reforms that the International Monetary Fund (IMF) conditioned a US$8 billion loan package upon. Faced with a serious economic crisis, an ongoing civil war, and the rapidly escalating COVID-19 pandemic, Ukraine risked plunging into default without the package.
Lifting the moratorium had been a key demand of International Financial Institutions since the 2014 Euromaidan movement and the resulting Association Agreement signed with the European Union. Known as the “bread basket of Europe” for its rich, black soil, Ukraine has 32 million hectares of fertile land — equivalent to one-third of all arable land in the European Union—and is the world’s leading exporter of sunflower oil and seventh-largest exporter of wheat.
“The goal is clearly to favor the interests of private investors and Western agribusinesses. International Financial Institutions have a long history of conditioning their aid to reforms and structural adjustments in order to force the privatization and liberalization of economies around the world. However, the manner by which the IMF has leveraged Ukraine’s economic predicament to force the country to make its land available for sale has no precedent in modern history,” said Frederic Mousseau, Policy Director of the Oakland Institute.
The new law will create a land market in several stages. Starting in July 2021, individual Ukrainian citizens will be able to purchase up to 100 hectares. The second stage begins in January 2024 and will raise the limit to 10,000 hectares and permit sales to legal entities. Foreign individuals and companies, are prohibited from purchasing land, a provision that can only be lifted by a national referendum.
Even with the above provisions, the law remains wholly inadequate in preventing further consolidation of land ownership. For instance, the ban on foreign owners from acquiring land would require the ability to trace and enforce, which is very unlikely within the current global economic system where companies and subsidiaries constantly change hands and are financed and owned without transparency. Loopholes remain in the new legislation, including the removal of restrictions on rezoning agricultural land, a practice that has been done in the past to circumvent ownership limitations.
Complementary legislation is already under consideration in the Parliament, including a proposal to increase taxes on owners and users of agricultural land. If passed, the regressive tax would disproportionately impact smallholders and peasant family farmers and subsequently increase pressure on them to sell their land.
“The majority of Ukrainians are against land market liberalization as the agribusiness interests and oligarchs will be the primary beneficiaries of such reform. Opening a land market, especially during an economic crisis, will only further marginalize smallholder farmers and risks severing them from their most valuable resource,” said Professor Olena Borodina, from the National Academy of Sciences of Ukraine (NASU), Head of the Ukrainian Rural Development Network, signatory of a December 2019 open letter by Ukrainian academics and civil society to the IMF, the World Bank, and the European Bank for Reconstruction and Development.
In an October 2019 survey, 73 percent of Ukrainian citizens opposed the lifting of the moratorium, and 81 percent were against land sales to foreigners. The final version of the bill passed only after the fallout from the ongoing COVID-19 pandemic further intensified Ukraine’s ongoing economic struggles and made the IMF loan essential. An emergency session of the Parliament was held into the early morning hours of March 31st to pass the bill onto President Zelensky for his signature after a prolonged debate and staunch resistance from parties opposed to the bill. The timing of the law’s passage coincided with mandatory stay at home orders in place across the country, effectively quelling potential protests or demonstrations.
Once the legal limitations are lifted in 2024 and legal entities can purchase up to 10,000 hectares legally, agribusinesses can further expand their access to land to intensify large scale, industrial agriculture. As previously reported by the Oakland Institute, multinational agribusiness firms are already heavily involved in Ukraine — Cargill, Bayer, and DuPont have all made substantial investments over the past few years. The European Bank for Reconstruction and Development, Ukraine’s largest international investor, has poured millions into supporting agribusinesses while pressuring the government for land reform to increase private investment.
“While proponents claim the law will lead to economic growth, it is very much unlikely that Ukrainians, including the seven million local farmers, will benefit from lifting the moratorium. Instead, the creation of a land market will increase corporate control of the Ukrainian economy while increasing poverty and inequality in the country,” said Mousseau. “It is wrong and immoral for Western financial institutions to force a country in a dire economic situation amidst an unprecedented pandemic to sell its land. The only way forward is to abrogate the new law,” he continued.