The World Bank has given its go-ahead to the $24.5-million Technical Assistance for Sustainable Agricultural Transformation (TASAT) program, which will complement the Philippines’ largest-ever single loan from the Washington-based multilateral lender aimed at diversifying the sector and moving away from the heavy focus on rice self-sufficiency.

Documents showed that the World Bank’s board greenlit this grant financing last April 23. To be implemented by the Department of Agriculture (DA), the TASAT grant aims to “strengthen institutional capacity and systems for climate-smart agriculture, repurposing fertilizer subsidy program, diversification, and increased export development and growth as envisioned by PSAT,” referring to the Philippines Sustainable Agriculture Transformation program.

TASAT’s approval follows the $1-billion loan financing for PSAT, which will also be implemented by the DA and is expected to benefit at least five million farmers nationwide.

Approved in March, PSAT aims to boost agricultural productivity, promote diversification, and enhance the climate resilience of agrifood systems across the country, specifically by prioritizing climate-smart practices in rice-based farming, including improved seed and nutrient management, water-saving techniques, greenhouse gas (GHG)-reducing methods, and post-harvest loss reduction.

As for TASAT, an earlier document said that this investment project financing (IPF), which will close in December 2030, will have four components: improving efficiency in rice-based farming systems and strengthening climate resilience, with an $8-million investment; enhancing crop diversification and boosting regional exports through intensified high-value cropping, worth $8.5 million; institutional strengthening to support the agrifood transformation agenda, with a $2.5-million allocation; as well as project management, monitoring, evaluation, and learning, with a $5.5-million budget.

The grant will be funded by two trust funds, with $14.5 million from the World Bank’s FoodSystems 2030, an umbrella multi-donor trust fund (MDTF) providing flexible financing to countries transforming their food systems by 2030, in line with the United Nations’ (UN) Sustainable Development Goals (SDGs) of zero hunger and poverty.

The remaining $10 million will come from the IBRD Fund for Innovative Global Public Goods Solutions (GPG Fund). IBRD is the World Bank Group’s (WBG) lending arm for developing countries like the Philippines.

The World Bank document noted that despite roughly $2 billion in annual spending on agriculture, equivalent to about 0.5 percent of gross domestic product (GDP) from 2019 to 2023, the sector has delivered weak results: average growth was just 0.15 percent from 2019 to 2024, with a 1.5-percent contraction in 2024, while agricultural exports fell 14.3 percent in 2023.

The lender blamed the underperformance on policies still focused on rice self-sufficiency rather than productivity and diversification, as well as a burdensome regulatory environment that discourages investment. Inefficiencies such as excessive paperwork, slow permitting, and unclear accountability have contributed to a 30-percent drop in agrifood exporters over the past five years, it added.

The World Bank pointed out that rice yields in the Philippines have improved only modestly—from 3.4 tons per hectare (ha) in 2003 to 4.7 tons per ha in 2024—despite rice receiving about 24 percent of the DA’s budget. This remains well below the eight to 10 tons per ha considered achievable and lags behind countries like Vietnam, which yields 6.1 tons per ha.

According to the World Bank, weak productivity is largely due to inefficient policies, particularly heavy reliance on input subsidies, which made up around 60 percent of the DA’s spending from 2015 to 2019. These have discouraged investment in productivity-enhancing technologies, limited crop diversification, and worsened climate vulnerabilities, the lender said.

As a result, high-value crops have seen only minimal growth in their share of value added, and low agricultural returns have deterred private-sector investment, according to the World Bank.

The World Bank also noted that the Philippines’ fertilizer subsidy program has proven inefficient and uneven, with benefits skewed toward larger farmers.

The lender said that while vouchers are distributed to rice farmers and redeemed through accredited channels, government involvement in procurement and distribution has crowded out private-sector participation. Instead of increasing fertilizer use, many farmers simply substitute subsidized inputs for those bought at market prices, it added.

Effectiveness is further limited by poor application practices due to inadequate research and extension support, as well as operational issues such as delayed delivery and mismatches between supplied fertilizers and actual soil and crop needs, the World Bank said.