Millions of Bangladesh’s poorest citizens are being shut out of vital government support systems due to severe targeting inefficiencies, untargeted subsidies, and fragmented social safety net programs, according to a report released Tuesday by the World Bank.
The multilateral lender’s report, titled Bangladesh Development Update: Make Subsidies and Social Protection Work Better for the Poor, reveals a stark disconnect between state spending and poverty relief.
The World Bank notes that while the government allocates substantial fiscal resources—spending approximately 3.5% of GDP on energy, fertilizer, and social assistance—nearly half of the country’s poorest households receive no safety net support at all, leaving the most vulnerable exposed as national poverty rises toward 22.8%.
According to the global lender’s analysis, the fundamental crisis lies in structural leakages and regressive spending.
The report highlights that a disproportionate share of public subsidies continues to benefit higher-income households and well-connected commercial operations rather than the low-income families most impacted by persistent double-digit food inflation.
Generalized energy subsidies present the sharpest example of this misallocation, the World Bank finds.
The report stresses that blanket price reductions on electricity and imported fuels predominantly subsidize rich urban consumers and large commercial enterprises with high consumption volumes, rather than low-income households.
The World Bank also points out that systemic governance deficits and capacity payments to quick-rental power facilities absorb vast public funds, crowding out targeted cash grants for the rural and urban poor.
The World Bank further identifies deep-seated fragmentation in the safety net architecture itself. Its research demonstrates that over a hundred social assistance schemes operating across dozens of government ministries suffer from duplicate efforts, high administrative overhead, and outdated beneficiary registries.
The global lender reveals that non-poor households frequently capture social protection benefits due to subjective selection procedures and local patronage networks, while marginalized groups—particularly informal urban laborers and landless agricultural workers—remain excluded.
In the agriculture sector, the World Bank observes that bulk fertilizer subsidies intended to protect smallholder farmer livelihoods are frequently siphoned off by distribution intermediaries or commercial agricultural operations, undermining food security for marginalized rural families.
Similarly, the report notes that specialized food assistance programs, such as Open Market Sales (OMS) and food-for-work initiatives, suffer from supply leakages and geographic mismatch, failing to reach urban slums where hunger is most acute.
Inefficient subsidization
World Bank experts warn that maintaining this inefficient subsidy structure is fiscally unsustainable and socially regressive.
With tax revenues severely constrained at just 7.0% of GDP, the World Bank warns that the state can no longer afford to waste public funds on un-targeted assistance.
To fix these structural failures, the report calls for an immediate overhaul of Bangladesh’s social protection framework.
The World Bank recommends phasing out broad, price-distorting energy and agricultural subsidies in favor of direct, targeted cash transfers to verified poor households.
Its key priorities include consolidating fragmented food assistance schemes, fully integrating and expanding the government's Dynamic Social Registry, and transitioning to digital payment systems to eliminate ghost beneficiaries.
"Reforming targeting mechanisms and redirecting subsidies directly to those in need is not just a fiscal priority—it is a moral imperative," the report emphasizes.
The World Bank estimates that structural refinements to social safety nets alone could lift an additional 2.85 million Bangladeshis out of poverty.