Bangladesh needs to shift agricultural public spending away from heavy fertiliser subsidies towards productivity-boosting investments if it is to lift farm incomes and strengthen food system resilience, according to a World Bank report.
The report, Repurposing Agricultural Public Spending for Quality Growth and Jobs in Bangladesh’s Agrifood System, says agriculture accounts for about 10 per cent of total public expenditure, reflecting its central role in employment and food security. But it warns that the structure of spending is increasingly misaligned with the sector’s needs as growth slows and dietary demand shifts.
Rising consumption of fruits, vegetables, livestock products and processed foods contrasts with a continued policy focus on rice, which still dominates both land use and public support.
Fertiliser subsidies remain the largest component of agricultural spending, absorbing about 80 per cent of the Ministry of Agriculture’s budget. While they have helped stabilise production, the World Bank says the current design results in an uneven distribution of benefits and weak incentives for efficiency.
Because subsidies are tied to fertiliser purchases, larger landholders capture a disproportionate share of support. The top 20 per cent of farmers receive about half of total subsidy benefits, while the bottom 40 per cent receive roughly 15 per cent.
The report also highlights inefficiencies in input use, noting that only about 5 per cent of farmers apply fertiliser within recommended balanced nutrient ranges, raising concerns over soil health and long-term productivity.
“Agriculture is central to Bangladesh’s development, job creation and poverty reduction. But climate risks, shifting consumption patterns, tighter fiscal space and rising price and supply disruptions of fertilisers due to the Middle East conflict are exposing gaps in policies and spending,” said World Bank Division Director for Bangladesh and Bhutan Jean Pesme.
“By modernising support delivery and gradually rebalancing agriculture spending towards high-return investments, Bangladesh can build a more resilient and productive agrifood system that delivers more and better-paid jobs.”
Rice accounts for around 72 per cent of cultivated land and about 80 per cent of subsidy allocation, reinforcing a structural bias that the report says has slowed diversification into higher-value segments such as livestock, fisheries, vegetables and agro-processing.
The World Bank argues that these subsectors, alongside underfunded areas such as research, extension services, irrigation efficiency and market systems, offer stronger potential for income growth and employment generation.
It warns that continued reliance on input-heavy subsidies is becoming increasingly costly as Bangladesh faces climate pressures, input volatility and rising import dependence for fertiliser.
The report recommends a phased reform path, starting with expanded soil testing, stronger extension services and the rollout of digital Farmer’s Cards and e-vouchers to improve targeting and reduce inefficiencies.
Over the medium term, it calls for scaling digital delivery systems nationwide and redirecting spending towards research, irrigation modernisation and diversification into higher-value agriculture.
In the longer term, it suggests gradually shifting away from input subsidies towards public goods that improve productivity, resilience and competitiveness across the agrifood system.
“Modernising fertiliser subsidy design and delivery offers a significant opportunity to save foreign exchange, increase agricultural productivity, improve soil health and ensure that support reaches the farmers who need it most,” said World Bank Senior Economist and co-author Mansur Ahmed.
The report concludes that Bangladesh’s agricultural competitiveness will increasingly depend not on the volume of public spending, but on how effectively it is reallocated towards productivity and resilience gains.
