Ukrainian Parliament Passes Land Market Law

31 March 2020 10:32

The Verkhovna Rada of Ukraine has adopted the law on the introduction of the agricultural land market. 259 MPs voted in favor of this decision in the early hours of March 31 with President Volodymyr Zelenskyy himself in presence.

The bill was approved in an updated, "compromise" version. It stipulates that the market should start working on July 1, 2021 (previously scheduled to start on October 1, 2020), after which for two more years only individuals will be able to buy land, and no more than 100 hectares.

For legal entities, the land market should be operational from 2024. At the same time, the companies will be able to accumulate up to 10,000 hectares in their property.

This law gives owners of agricultural land the right to sell their land (shares) and to buy land. Previously, people could only transfer land through long-term leases, some of them lasting decades.

A moratorium (ban) on land sales has been in force in Ukraine since 2001. It was first extended to 2005 -- by that time Ukraine had to develop a law on agricultural land circulation and introduce a market. However, this did not happen, so the moratorium was prolonged annually by one year at a time. The land moratorium was last extended until the end of 2019, but the land market will not work until the land circulation law is passed.

The right to buy and sell agricultural land allows full ownership of the land shares and opens up the possibility of using the land as collateral for loans.

At the same time, there are fears in society that opening up the land market will lead to "all the land being bought up by oligarchs, multinational companies and foreigners." But granting the right to buy and sell land does not mean that the owners of land shares will lose the right to use them. In other words, nothing can force a person to sell their share

The parliamentarians filed a total of 4,018 amendments to the land market bill. As of March 6, the deputies managed to consider only 3,298 of them. The rest of the amendments were reviewed on March 30. The bill was finalized at 12:40 a.m. Kyiv time on March 31.

The Parliament had been considering the land market bill since February 6, 2020. In total, during this time, there were 10 session days when the Rada held votes. The rest of the time, the MPs were working either in committees or with voters.

According to sociological surveys of the Razumkov Center, only 21.4% of Ukrainians support the introduction of the agricultural market.

Adoption of land law and the so-called "anti-Kolomoisky" law are key requirements of the International Monetary Fund to sign a new program of cooperation with Ukraine, which provides funding of up to $8 billion.

Currently, Ukraine needs the IMF program because it cannot attract sufficient funding in the financial markets because of the crisis caused by the coronavirus pandemic. Investors are no longer attracted to Ukrainian bonds and other assets. This may cause the state to have insufficient funds to repay peak public debt payments due in May, July and September 2020.

IMF funding can go to both reserves and the budget. Moreover, obtaining a loan from the IMF will allow the government to attract cheap financing from the E.U. and the World Bank.