Farm loan relief must be backed by reform

We welcome the decision of the new government, led by Prime Minister Tarique Rahman, to waive agricultural loans of up to Tk 10,000, including accrued interest.

The measure offers immediate relief to some of the country’s most vulnerable citizens and fulfils a commitment made in the election manifesto of the Bangladesh Nationalist Party (BNP).

As reported in The New Nation on Friday, the initiative will cover approximately Tk 1,550 crore and benefit around 1.2 million farmers.

There is strong humanitarian justification for this step. Small and marginal farmers operate on narrow margins, exposed to erratic weather, volatile prices and rising input costs. For many, a loan of Tk 10,000 is not trivial but a crucial support.

Relief from accumulated debt may restore confidence, enable reinvestment in seeds and irrigation, and provide genuine psychological reassurance.

The policy also carries broader economic implications. By easing debt burdens, the government aims to stimulate agricultural output, reduce reliance on imports and slow excessive rural-to-urban migration.

If farmers can redirect funds previously used for instalments into productive investment, the multiplier effects may be meaningful.

Improved credit standing could also strengthen engagement with formal banking channels, reducing dependence on high-interest informal lenders.

However, loan waivers, however compassionate, are not a structural solution. They address immediate distress but not the underlying causes of recurring indebtedness.

Inadequate crop insurance, weak market linkages, post-harvest losses and limited access to affordable inputs continue to undermine rural resilience. Without reform in these areas, debt cycles may persist.

We like to say fiscal prudence must also be considered. Repeated waivers risk creating expectations of future write-offs, potentially weakening credit discipline. State-owned banks may face financial strain, with implications for the wider economy.

Bangladesh has seen similar initiatives before. During the 1991–1996 tenure of former Prime Minister Khaleda Zia, comparable relief initiatives were introduced.

While past relief measures provided short-term respite, structural vulnerabilities in agriculture still remained.

However, this decision should therefore be viewed as necessary emergency relief. Its long-term success will depend on complementary reforms — including expanded crop insurance, fair pricing mechanisms, improved storage and supply chains, and stronger rural financial literacy.

We must say only through sustained structural change can immediate relief translate into durable resilience for farmers and the broader economy.