"Although the agricultural sector has been severely impacted by droughts, the economic consequences have not yet been fully felt, mainly due to government and commercial moratoriums, which only delayed company debts rather than canceling them. On August 1, 2025, these ordinances will expire, placing all companies that benefited from assistance at risk of insolvency. Consequently, we anticipate a significant rise in insolvency cases in agriculture. This year, half of the troubled companies have gone directly into bankruptcy," stated Radu Tudor, Senior Partner at Infinexa.
According to Infinexa's data, between January 1, 2024, and September 30, 2024, there were 123 applications to initiate collective insolvency proceedings against companies in the agricultural sector. Out of these, 66 cases were admitted by the court, involving companies with over €300 million in assets (€193 million in fixed assets and €112 million in current assets). Nearly half of the companies whose applications were admitted went directly into bankruptcy, with no chance of recovery. Thirty-eight were placed under general insolvency proceedings, while only one entered preventive concordat proceedings.
In 2024, the government introduced a series of measures to protect companies in the agricultural sector, considering the drought affecting crops. Emergency Ordinance No. 4/2024 established temporary support measures for agricultural producers to manage the effects of the soil drought from the October 2023 – September 2024 agricultural year and as a response to Russia's aggression against Ukraine. This ordinance will expire on December 31, 2024.
As a result, a new normative act, OUG 118/2024, was adopted to supplement it, which suspends the payment obligations of outstanding debts owed in 2024 to creditors by agricultural producers, at the producer's request, until August 1, 2025. Meanwhile, the latest ordinance, OUG 120/2024, introduced a state aid scheme in the form of a RON 1,000/ha grant for agricultural producers who planted crops in the fall of 2023 and/or spring of 2024 and have damage assessment reports for crop areas with losses between 30% and 100%. The expiration date for this aid has not been specified.
Radu Tudor noted, "To avoid major financial disruptions, companies that benefited from government moratoriums should, before they expire, maximize efforts to stabilize their current business activities by prioritizing their outstanding debts. As for debts accumulated in 2023-2024, it is recommended that they start informal negotiations with creditors now, in order to include all these amounts in a future collective recovery procedure. If planned correctly, this can be forecasted as a cost in the budgets for the coming years."
The latest study by the European Drought Observatory, conducted in September 2024, shows that Eastern Europe is severely affected by drought, with over half of Romania's territory classified as critical. Furthermore, just over half (56.63%) of Romania's territory is agricultural land (13.5 million hectares), of which 12.59% (1.7 million hectares) has been affected by drought impacting spring crops in 2024, according to national studies that formed the basis for adopting OUG 4/2024 and OUG 118/2024.
