Modelling the impact of loan repayment deferrals on the amount of farm interest costs during the COVID-19 pandemic

During the years 2020-2022, the world was dominated by the Covid-19 pandemic.Companies, as well as the population, felt financial difficulties due to the pandemic, and therefore they were forced to accept help from the banks.Central banks, as well as commercial banks, tried to introduce as many measures as possible to help clients, as they realized that client's problems could easily be transferred to the banking sector, which is very sensitive to credit risk.These measures concerned the agricultural sector, too.However, some measures taken by the banks brought additional financial costs to the farms, which the farms were often unaware of.Therefore, the main goal of this article is the valuation of selected measure in the banking sector to mitigate the negative effects during the COVID-19 pandemic crisis, with a focus on modelling the impact of loan repayment deferrals on the amount of farm interest costs.We developed an initial model to assess the effects of deferring loan repayments on farm interest expenses, from which we generated four distinct loan repayment variations.Variant III emerged as the most beneficial option, wherein the deferral of loan repayments was solicited after 15 years of repayment, corresponding to the completion of 75% of the payback period, without extending the loan repayment duration.The results show generally that the most unfavourable deferment of loan repayments was for farms that were at the beginning of repaying their loans and at the same time requested an extension of the loan maturity period.