Consumption falling, yet rice eats up most public spending

Although Bangladeshis have been eating less rice over the past two decades, public spending remains heavily concentrated on rice production, according to a new World Bank report.

As a result, investments in higher-value farming subsectors such as livestock, fisheries, vegetables and agro-processing are ultimately being discouraged, said the report.

Launched yesterday, the report, titled “Repurposing Agricultural Public Spending for Quality Growth and Jobs in Bangladesh’s Agrifood System”, found that rice occupies around 72 percent of cultivated land and receives about 80 percent of subsidy benefits.

Similar to subsidies, public spending is also heavily skewed towards rice, the report said.

High-value and fast-growing subsectors including livestock, fisheries, forestry, fruits and vegetables contribute nearly three-quarters of agricultural gross domestic product but collectively receive less than 20 percent of public spending support.

“This subsidy and public spending imbalance reinforces a structural bias away from diversification, even as diets and markets continue to shift toward higher-value foods,” the report added.

The report launch was jointly organised by the World Bank and the South Asian Network on Economic Modeling (Sanem) at Sheraton Dhaka.

Speaking at the event, Mansur Ahmed, senior economist at World Bank, said consumer demand is shifting away from cereals towards higher-value products, including fruits, vegetables, fish, livestock products and processed foods.

“A large share of agricultural spending continues to be directed toward fertiliser subsidies and rice-related support, while investments in research, extension services, innovation, market connectivity, and climate resilience remain relatively limited.”

According to Ahmed, as the country’s agri economy evolves, public spending must evolve with it.

The report found that agri research received only 4 percent of total outlays, while knowledge dissemination accounted for 8 percent and irrigation infrastructure 5 percent.

Together, these patterns point to a spending mix that is misaligned with the sector’s potential to support diversification, create better jobs and build a more competitive agrifood economy, according to the report.

Jonaed Shohol, research analyst at the World Bank, said more than 90 percent of agricultural spending is directed toward crops, with rice receiving the overwhelming share of support

“At the same time, livestock, fisheries, and other high-value agricultural activities which offer growing opportunities for income generation, employment, nutrition, and exports receive comparatively limited resources.”

He added that while these policies have contributed to food security gains, they leave limited fiscal space for investments that can drive long-term productivity growth.

The researcher said the challenge is no longer the level of spending but how effectively resources are allocated.

SUBSIDY BENEFITS TILT TOWARDS BIG FARMERS

The report also found that the top 20 percent of landholders receive about half of all fertiliser subsidy benefits in Bangladesh, while the bottom 40 percent receive only 15 percent.

It said fertiliser subsidies remain the largest form of farming support, accounting for about 80 percent of the agri ministry budget.

These subsidies have helped farmers maintain production and price stability. However, because support is linked to the amount of fertiliser purchased, farmers with more land receive a larger share of the benefits, the report said.

The World Bank noted that Bangladesh places a high priority on agriculture, allocating about 10 percent of total public spending to the sector.

“Yet, agricultural growth has slowed, productivity gains have weakened, and diversification into higher-value products has lagged.”

According to the report, correcting these imbalances could substantially raise yields and improve productivity.

The World Bank recommended expanding soil testing, strengthening farmer advisory services and rolling out the Farmer’s Card and e-voucher system so that agricultural support reaches poorer and climate-vulnerable areas.

It said better-targeted support could gradually free up resources for investments that raise productivity, promote higher-value agriculture and benefit poorer farmers.

MAKING SUBSIDIES MORE PRODUCTIVE

Jean Pesme, division director for Bangladesh and Bhutan, said that by modernising subsidy delivery and aligning public spending with emerging opportunities, Bangladesh can build a more resilient and productive agricultural sector while ensuring better value for public resources.

Selim Raihan, professor of economics at Dhaka University and executive director of Sanem, said the composition of agricultural spending has become a central concern.

“A growing share of the budget is allocated to recurrent subsidies, which limits fiscal space for high-return public investments such as research, extension services, irrigation, rural infrastructure, storage, marketing systems, food safety, and climate adaptation. These are the areas that drive long-term productivity growth and structural transformation,” he said.

Food and Agriculture Organization (FAO) Representative in Bangladesh Jiaoqun Shi said Bangladesh faces significant challenges in fertiliser use because of reliance on traditional farming practices, urea-heavy subsidies, limited soil testing and weak extension services.

“Fertiliser use is often guided by generalised recommendations rather than soil-specific nutrient requirements, as access to soil and fertility mapping remains limited. The subsidy structure favours urea, encouraging its overuse while discouraging balanced application of other essential nutrients and organic inputs,” he said.

Uzma Chowdhury, director at the PRAN-RFL Group, said all government departments are working to increase production, but insufficient attention is being paid to market development and distribution systems.

“Without alignment between producers and consumers, market distortions arise. The presence of multiple intermediaries prevents farmers from receiving prices that cover production costs or generate adequate income,” she said.

“Livestock, fisheries, and other sectors operate under different cycles, and even products like salt have distinct supply chains. A uniform policy approach cannot address these diverse needs,” she added.

Agriculture Minister Mohammed Amin Ur Rashid highlighted ongoing efforts to reduce production costs and improve efficiency through better soil management, reduced fertiliser overuse and the expansion of solar-powered irrigation systems.

“We are also working to reduce import dependence in selected commodities such as onions, jute seeds, and ginger through structured medium-term planning,” he said.

Referring to structural challenges in the sector, the minister highlighted issues related to market information gaps, post-harvest losses and price volatility.

“To address these challenges, we are promoting better demand forecasting, decentralised storage solutions, and improved supply chain efficiency to ensure fair prices for farmers and stable access for consumers,” he said.

He also noted efforts to improve soil health and irrigation systems.