Further, the credit programmes were directed to an agricultural sector
that in many countries was experiencing strongly negative terms of
trade. The combination of unfavourable exchange rate regimes, punitive export/import taxes and tariffs, as well as domestic commodity
price controls, depressed earnings in agriculture (See Box 1, Schiff and
Valdes, 1995). The new technologies and input packages, however,
were just not sufficiently profitable at prevailing market prices. While
farmers could be bribed to accept the new technologies by subsidising
lending rates and soft credit arrangements which put little emphasis on
loan repayment, they were not committed to use these technologies in
case subsidies and soft credit were absent. Central banks provided often
concessionary rediscount facilities to banks for credit provision to targeted population groups and strategic agricultural commodities, while