New World Bank Analysis Reveals Gaps in Bangladesh Fertilizer Subsidy Policy

Bangladesh’s massive fertilizer subsidy program is facing renewed debate after a new World Bank study revealed that a large share of the benefits goes to wealthier farmers rather than the poorest rural households. The study, prepared by researchers FNU Jonaed, Ivan Gachet, and Leopoldo Tornarolli under the World Bank’s Fiscal Policy and Growth Global Department, used data from the Bangladesh Bureau of Statistics (BBS) and the International Food Policy Research Institute (IFPRI) to examine who truly benefits from one of the country’s biggest agricultural support programs.

The report comes at a time when fertilizer subsidies are putting increasing pressure on public finances. In fiscal year 2023, Bangladesh spent nearly $2.5 billion on fertilizer subsidies, making it one of the government’s largest agricultural expenses. The subsidy now accounts for almost two-thirds of the Ministry of Agriculture’s budget and around one-quarter of total public spending on food and agriculture.

Why the Subsidy Matters So Much

Fertilizer subsidies have long been seen as essential for protecting farmers from rising global input prices and helping maintain food production. Many farmers rely heavily on subsidized fertilizers such as urea, Triple Superphosphate (TSP), Muriate of Potash (MOP), and Diammonium Phosphate (DAP) to sustain crop yields.

However, the study warns that the growing cost of the subsidy system is reducing the government’s ability to invest in other important sectors like irrigation, agricultural research, rural roads, and extension services. Experts say these investments are critical for improving long-term agricultural productivity and food security.

Researchers also highlighted environmental concerns linked to the overuse and imbalanced application of chemical fertilizers. Excessive fertilizer use can damage soil quality and create long-term environmental risks for Bangladesh’s farming sector.

A Data Problem That Hid the Real Picture

For years, policymakers struggled to understand exactly who benefited from fertilizer subsidies because Bangladesh’s main household survey did not contain enough detailed information.

The Household Income and Expenditure Survey (HIES) 2022 records how much households spend on fertilizers overall but does not specify which types of fertilizer they purchase. Since subsidy rates differ across fertilizer categories, it was impossible to calculate the true value of benefits received by different income groups.

To solve this problem, the researchers developed a new statistical method that combined HIES data with the Bangladesh Integrated Household Survey (BIHS) 2018–2019 conducted by IFPRI. Unlike HIES, the BIHS includes detailed information on fertilizer use by type and quantity.

Using advanced machine-learning techniques, the researchers matched households across both surveys based on factors such as land ownership, crop production, income, education, housing conditions, access to credit, and ownership of farming equipment. This allowed them to estimate fertilizer-use patterns for households in the national survey.

Richer Farmers Still Capture Big Benefits

The findings show that fertilizer subsidies do reach many low-income households. Nearly half of all beneficiary households belong to the bottom 40 percent of the income distribution, suggesting that poor farmers are widely covered by the program.

But the study also found that wealthier farmers receive a much larger share of total subsidy money because they buy and use more fertilizer. The richest 20 percent of households capture nearly one-third of all fertilizer subsidy benefits, despite representing a much smaller share of total beneficiaries.

In relative terms, poorer households depend more heavily on the subsidy. For the poorest 20 percent of households, fertilizer subsidies account for just over one percent of income, while the benefit is far smaller for richer households. Still, the overall redistributive effect of the subsidy remains limited because larger farmers continue to receive substantial financial support.

A Push for Smarter Agricultural Support

The World Bank study does not call for the complete removal of fertilizer subsidies. Instead, it argues for better targeting and smarter agricultural support policies that can protect vulnerable farmers while reducing wasteful spending.

Researchers say the findings could help Bangladesh redesign its subsidy system in ways that improve fairness, reduce fiscal pressure, and encourage more balanced fertilizer use. The report also demonstrates how modern data tools and machine-learning methods can help governments make better policy decisions even when official datasets are incomplete.

As Bangladesh faces rising fiscal challenges, climate pressures, and growing demands on its agricultural sector, the study is likely to intensify discussions about whether the country’s current fertilizer subsidy model is the best way to support farmers and ensure food security in the years ahead.