*4.1. The Dynamics of Agriculture Subsidies and Agriculture Loans*

The agriculture subsidies and agriculture loans are meant to significantly influence the agriculture sector's productivity and sustainability. Therefore, since it is considered a key sector for the Republic of Moldova's economy, agriculture benefits from governmental subsidies are materialized in development of exports, maximization of production and productivity, production diversification in order to introduce new crops with high added value, improving food safety and security and, also, reducing those agricultural regions affected by natural disasters and decreasing the effects of climate change. However, proper policies must be established in order to increase the number of agriculture farms that can access this source of governmental financing. According to Khatkar et al. [38], agricultural credit

and subsidies are also considered important supporting factors for agriculture growth. In the Republic of Moldova, the dynamics of agriculture subsidies registered a significant decrease between 2010 and 2011, followed by an upward trend till 2014 (Figure 2). The high number of governmental subsidies recorded in 2013 and 2014 can be most likely associated with the restrictions imposed by the Russian Federation on the Republic of Moldova's agri-food imports and exports. Stratan et al. [39] emphasizes that domestic food producers were mostly exposed to the negative consequences of the Russian restrictive measures in external trade with the Republic of Moldova, during 2013–2014.

**Figure 2.** The dynamics of agriculture subsidies, agriculture loans and percentage of subsidized agriculture farms (\*the left y axis is associated with subsidies and the right y axis associated with agricultural credits).

However, the percentage of Moldavian agriculture farms that benefit from governmental subsidies is very low, with an average of 0.41% from the total number of registered and active agriculture farms in the Republic of Moldova territory (Figure 2). It also can be observed that the lowest number of subsidy-financed farms is registered both in 2011 and 2014 (Figure 2). For 2011, this result is explained by the low value of available subsidies. For the year 2014, the situation can be justified by the political restrictive measures described above, the fact that created the incertitude related to the possibility of marketing the entire agriculture production and discouraged farm owners to apply for this type of government financial support. The average value of subsidies per agriculture farm during the nine-year period was 7538.46 USD, with the maximum value in year 2014 (16,079.76 USD) and a minimum value in year 2010 (5070.69 USD).

According to the Moldovan Agency for Intervention and Payment in Agriculture (A.I.P.A.) (aipa.gov.md), during the years 2008–2011, the majority of the subsidies' total value (46.40%) were invested in agriculture equipment in order to maximize agricultural mechanization. However, this percentage decreased to 28% between the years 2012 and 2016 (aipa.gov.md).

According to the A.I.P.A., based on the registered data, 19.00% of the total subsidy value allocated by the government were directed by beneficiary agriculture farms, during the period between 2008 and 2011, to post-harvest and processing infrastructure, while this percentage increased to 21.00% between the years 2012 and 2016. The situation is obtained based on the data collected by A.I.P.A. directly from subsidized agricultural farms, related to how the subsidies were spent. The activities set up a multi-annual plantation benefit of 15.00% of the total subsidy value during the years 2008–2011, while during the years 2012–2016 this percentage increased to 17.00%. Furthermore, the production insurance percentage increased from 3.80% of the total value of the subsidies (between 2008 and 2011) to 6.85% (between 2012 and 2016), most likely due to the risks of climate change. Thus, most of the subsidies were used for limiting the possible risks to which agriculture farms are exposed, for

developing the irrigation technologies, anti-hail and frost control systems, as well as for on-farm land maintenance investments. Only 3.00% of the agricultural need for financing is covered by subsidies; approximately 33.00% is covered by agricultural loans [37]. The dynamics of the agriculture loans is, in most analyzed years, indirectly correlated with the dynamics of the subsidies. However, there is a large difference between the values of the subsidies and the agriculture loans (Figure 2), a fact that reveals the high demand of Moldavian agriculture farms for financial support. Agricultural long-term loans are mainly used for investment purposes, while short-term loans are for production purposes. Thus, since agriculture loans are more likely accessed by agriculture farms, the farm owners prefer to use these financial founds to cover the facility operational costs and, therefore, maintaining the production potential of the farm. However, if subsidies are accessed, chances for new investments directed for improving fish farms productivity increase. However, most agriculture loans to Moldavian farms are short-term loans. This situation imposes the continuity of the governmental agriculture subsidies program in order to assure the technological development of the agriculture sector. A rational use of both subsidies and agriculture loans can also contribute to the development of a new agricultural production niche, as ecological agriculture.

Thus, if subsidies are invested in order to target the diversification of the production panel with new organic products that resulted from ecological agriculture practices, new consumer market niches can be accessed and exploited, resulting therefore in possible profitability maximization. According to Vozarova and Kotulic [40], agricultural subsidies help to increase the performance and reduce world prices. On the other hand, they also disrupt international markets and reduce economic efficiency.
