Description

Government export credits enable foreign buyers to purchase domestic products on non-standard market terms. This usually means postponing the payment until a later point in time (usually up to a year for food). The government supports these credits, which are generally provided by export credit agencies, by providing guarantees, insurance or cheap interest rates.

Agricultural export credits can help establish agricultural products on the world market and boost sales. However, they are an expensive instrument. It makes more sense to first promote the development of national agricultural credit markets, particularly for poor developing countries with limited budget resources. Export credits are often used more widely during financial crises in order to counter restrictive lending to the agri-food sector by private banks.

Agricultural export credits may not be used as export subsidies in disguise in order to avoid trade sanctions. Common rules on agricultural export credits, export credit guarantees or insurance programmes were defined within the Nairobi packages’ in December 2015. Members commit not to provide export credits, export credit guarantees or insurance programmes for exports of products listed in Annex 1 of the Agreement on Agriculture, unless under certain conditions that are also listed in the Nairobi package.

Requirements

• A properly functioning country-wide administration and monitoring system with access to the relevant information and sufficient technical and human capacities for its design, implementation and monitoring
• Clear and coherent political strategy and targets for policy-makers and public authorities
• Close cooperation and knowledge sharing with research institutions
• Compatible regional and world trade law (WTO conformity)
• Constant market surveying and forecasting
• Efficient customs administration
• Market price information systems
• Regulated and legally protected payment structures

Possible Negative Effects

• Higher government spending
• Higher prices for consumers and processors if export credits lead to shortages in the home country
• Corruption in the issuing of credits