Hungary looks to bountiful harvest to help repay its Western debts

By , Special correspondent of The Christian Science Monitor

Hungary is looking to agriculture - particularly prospects for a record grain harvest this year - to help it weather its most serious economic pressures since the mid-1970s.

It owes the West some $600 million in debt servicing this year, which is nothing like the difficulties Poland and Romania are experiencing. Those two East-bloc allies have foreign debts of some $26 billion and $10 billion, respectively.

Hungarian officials are quietly confident they can continue to make normal payments on their loans. But like their East-bloc neighbors, they are feeling Western bankers' general anxiety about putting more money into Eastern Europe while the uncertainties created by Polish martial law exist.

Recommended: Default

Hungary got a welcome break in June, with a new loan for $210 million from a group of West European and Japanese banks. It was the first Western credit extended to Hungary since January.

Without such credits, Hungary has to draw on gold and hard-currency reserves, which dropped considerably last year. It also has to boost its foreign trade to meet obligations abroad at the same time as it resists erosion of its standard of living.

This is where agriculture comes in. Farming is the great success story of the economic reform that began here in the late '60s.

Blending independent management for the big state cooperatives and almost free rein for private husbandry, Hungarian agriculture is easily the most effective in the bloc. It has been exporting 1 million tons of grain (mostly wheat) annually for five years, while the Soviets and most other East Europeans have been importing grain from the United States, Argentina, and other countries.

This year's harvest is expected to be 14.2 million tons, up from 12.7 last year. The increase is due in large part to a government offer of premiums for farmers who boost yields 10 percent or more. It should mean more grain for export.

Meat is another important export, earning more than $1 billion last year. At the same time Hungarian agriculture has been providing some 165 pounds of meat and fish per person per year. A Pole, in comparison, gets rations totaling 66 pounds a year.

Hungary's general economic openness to the West has had a lot to do with its agricultural successes. Its takeoff in grain production was largely generated in cooperation with the Chicago-based Closed Corn Production Corporation. The big state cooperatives have long used American tractors assembled here.

For years they have scoured the West for technology and expertise. In May, 14 cooperatives sent specialists to study broiler chicken production in the US. Specialists in merino sheep farming, livestock, and farm machinery have been sent to Italy, West Germany, and Austria this summer.

The development of joint ventures between farm managements and groups of their members is another factor. For example, a cooperative recently took over an unused mill to expand its fodder concentrate plant with an eye to surplus to sell.

The project was to cost 16 million forints (about $400,000) and the farm budget could bear only half. The other half was offered in 100,000 forint ''private'' shares that found eager buyers among members of the cooperative and pig- and poultry-owning households outside the farm.

The new plant is to be run by a manager elected by a board half of whose members represent the new investors. The others are delegates from the parent farm. The shareholders will get the same interest as in their savings banks, and dividends are projected at 7 percent.

Share this story:

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...