Farm credit has been provided by the government through the Agricultural Bank, which was reconstituted as the Bank for Agriculture and the Food Industry in May 1971. Available information on the credit operations of the bank is limited to a few summary data on credits to collective farms. Information on the financing of state farms is lacking.
As expressed by the bank's president, long-term credits for investment and short-term credits for production needs have been used by the state as levers for the economic and organizational development and for the consolidation of collective farms. Long-term credits granted during the 1962-69 period amounted to 6.4 billion lei, or an average of 800 million lei per year. During the same period the farms received about 30 billion lei in short-term production credits, or about 3.75 billion lei per year. The annual volume of investment credits increased sharply after 1967; it was reported to have reached 1.8 billion lei in 1970 and to have been planned at more than 2 billion lei for 1971. A rise was also reported in the yearly volume of production credit.
Investment credits generally carry an annual 3-percent interest charge, but the interest rate may be reduced to 2 percent for economically weaker farms. Comparable information on production credit is not available, except for an official statement that a large part of it has been granted free of interest.
Postponement of scheduled long-term credit repayments may be authorized by the bank with the approval of the Ministry of Finance for periods of up to one year in the case of collective farms that are unable to meet the due date for reasons beyond their control, such as a crop failure. At the same time the bank may discontinue credits or demand repayment before the due date in the event that borrowed funds are improperly or inefficiently used. Penalties are also provided for short-term borrowers who fail to respect contractual obligations. As a measure of assistance to poor cooperatives, the repayment of loans in the amount of 1.15 billion lei, contracted before 1968 and due in 1972, was remitted by decision of the Central Committee of the Romanian Communist Party in December 1971.
The distribution of long-term credits to collective farms among different types of investment projects changed significantly during the 1960s. In 1962 and 1963 more than half the credits were granted for the expansion of livestock production, and one-fourth of the credits were devoted to the construction of farm buildings. In the last two years of the decade, however, only 5 percent and 3 percent of the credits, respectively, were earmarked for these purposes. Emphasis shifted in the mid-1960s to land improvement, the extension of orchards and vineyards, and vegetable production. In the 1967-69 period 83 percent of the investment credits were used for these projects. A lack of significant progress in the livestock production of collective farms, despite the heavy investment, was the main reason for the drastic reduction in credits to this farm sector.
In mid-1971 the bank was authorized to grant credits to private farmers and to individual members of collective farms for periods of up to five years at an annual interest rate of 3 percent. These credits may be used to purchase for breeding and production purposes a limited number of cattle, sheep, bee colonies with hives, and fruit tree seedlings for orchards up to 7.4 acres in size. Credits may be granted up to 70 percent of the purchase value of these items. To ensure repayment of the loans, recipients must conclude contracts with state procurement agencies or collective farms for the sale of their products.
Procedures for granting credits to collective farms were tightened in 1969 in a move to ensure a more effective use of borrowed funds and the timely repayment of outstanding debts. Under the new regulations, credits may be granted only for investment projects and production expenditures that guarantee the attainment of planned returns and unconditionally ensure loan repayment on the due date. The principal criteria for granting long-term credits are the need for, and the economic effectiveness of, the investment projects and the outlook for completing the projects within prescribed time limits. Economic effectiveness is analyzed in terms of production growth, increase in output per acre or per head of livestock, and rise in labor productivity and revenues.
Despite increasingly close supervision by the bank of its borrowers' activities, the effectiveness of investment credits in many instances has not measured up to expectations. Inadequate project analysis, construction delays, cost overruns, dissipation of funds, program changes that made partially or fully completed projects obsolete, and various other shortcomings have been cited by bank officials as the major reasons for this situation. As a means of resolving the problems, the officials have stressed the need for more profound project evaluation, greater stringency in granting loans, and increased firmness in the supervision of borrowers. They have also emphasized the criterion of ability to repay as being one of basic importance.
PRODUCTION
Total Farm Output