Financing Education / pdf - Unesco

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PROGRESS IN FINANCING EDUCATION FOR ALL Contribution of external aid to EFA since Dakar Box 4.3: Non-concessional loans for education In addition to ODA, multilateral agencies provide non-concessional loans for education. The amounts committed by the regional development banks are relatively small. From 1999 to 2005, the African Development Bank committed US$17 million a year, the Asian Development Bank US$80 million a year and the Inter-American Development Bank about US$250 million a year, on average. About half these loans were specifically for basic education. The non-concessional loans granted by the World Bank through the International Bank for Reconstruction and Development (IBRD), which averaged US$840 million a year over 1999—2005, contributed significantly to support education systems in many middle income countries (Figure 4.14). The amount was similar to that of aid allocated to education through IDA. Figure 4.14: IBRD loans to education (commitments), 1991—2005 Constant 2005 US$ billions 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 1.5 1.2 1.1 1.4 1.6 1.2 0.9 1.7 1.2 1.2 0.7 0.7 0.5 0.5 0.9 The amounts committed by the regional development banks are relatively small 0.0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: Raw data provided by EdStats, World Bank. The regional distribution of non-concessional loans differs significantly from that of IDA credits. Between 1999 and 2005, over half of the loans committed by the IBRD were for Latin American and Caribbean countries, while Europe and Central Asia, East Asia and the Pacific, and the Middle East and North Africa each received about 15% of the total (Figure 4.15).* Countries in sub-Saharan Africa and South Asia together received around 5%. Figure 4.15: Regional distribution of IBRD loans to education (commitments), 1991—2005 70% Share of region in total 60% 50% 40% 30% 20% 10% 0% Latin America and Caribbean Europe and Central Asia Middle East and North Africa East Asia and Pacific South Asia Africa 1991–1993 1994–1996 1997–1999 2000–2002 2003–2005 Source: Raw data provided by EdStats, World Bank. * The regional classification in this box is that used by the World Bank. 163
2 0 0 8 CHAPTER 4 <strong>Education</strong> for All Global Monitoring Report In Mali, 48% of the savings from debt relief was directed towards the education sector 14. Major donors to a country are defined as those that contributed at least US$3 million between 2003 and 2005. The experience, however, was not universal. In nine of the thirty countries – Benin, Bolivia, Burundi, the Gambia, Ghana, Malawi, Mauritania, Nicaragua and the Niger – the share of poverty reduction programmes in total expenditure fell (IDA/IMF, 2006). The World Bank and the International Monetary Fund (IMF) have encouraged most countries to merge the savings from debt relief with all other sources of revenue; therefore, beyond the broad category of poverty-reducing expenditure it is difficult to identify the extent to which expenditure on basic education has been directly funded from these savings. Evidence does exist, however, for a few countries. In Mali, each year between 2001 and 2005, 48% of the savings from debt relief, on average, was directed towards the education sector, and 37% was for basic education alone. As a result, expenditure on education increased by an additional 14% over the five-year period, and basic education by an additional 15%, because of debt relief (Bender et al., 2007). The HIPC Initiative largely provided relief on bilateral debt. One of the agreements at the G8 meeting in 2005 at Gleneagles was to extend this process to cover debts to the IMF, the African Development Bank, the Inter-American Development Bank and the World Bank through the Multilateral Debt Reduction Initiative (MDRI). The eligible countries are the same as for the HIPC Initiative and the process is again linked to poverty reduction strategies. Over the long-term, the MDRI will double the volume of debt relief from the HIPC Initiative. The main beneficiaries of debt relief programmes so far have been (in descending order) Mozambique, Uganda, the United Republic of Tanzania and Burkina Faso. Over the longer term, Ghana, the United Republic of Tanzania, Ethiopia, Uganda, Zambia, Senegal, Côte d’Ivoire and the Democratic Republic of the Congo will be the main beneficiaries. An evaluation of the HIPC Initiative by the World Bank Independent Evaluation Group concluded that by tracing public expenditure classified as povertyreducing, the approach ‘has leaned towards channeling additional resources to social expenditures’ (World Bank Independent Evaluation Group, 2006a). Changing ways of delivering aid to increase effectiveness At Dakar, funding agencies were asked not only to provide more aid but also to make its provision more predictable, longer term and in support of sector-wide reforms and programmes. Since then, this concern for new and more effective forms of aid to help governments implement comprehensive programmes across the whole of the education sector (or at least subsector, but within some overall sectoral perspective), as opposed to funding specific projects, has grown. This subsection reviews progress on this agenda by (a) using the OECD-DAC aid data to document the growth of aid for sector-wide programmes and sector budget support, compared to traditional project aid, since Dakar, and (b) examining the policies and practices of individual donor agencies in relation to the new aid modalities and providing country case studies. Experimentation with new ways of assisting educational development had begun by the late 1990s with several bilateral and multilateral agencies participating in sector-wide approaches (SWAps), including the provision of direct budget support for education. In 2005, the Paris Declaration on Aid Effectiveness, signed by 107 countries and twenty-six international organizations, generalized these developments and introduced indicators of progress and targets of good practice for five key elements of aid effectiveness: ownership, harmonization, alignment, results and mutual accountability (OECD-DAC, 2005). Many factors have been behind the push to increase aid effectiveness and the form aid takes. These include recognition of the inefficiencies and high transaction costs for aid-recipient countries of development agencies ‘going it alone’ with their own individual projects and monitoring missions. Table 4.11 shows the number of major donors to education in the sixty-eight low-income countries. In twenty countries there are at least eight major donors and in ten countries at least twelve. 14 In addition, often a large number of international agencies and international non-government organizations are on hand administering relatively low-cost projects. Another impetus for changing the ways aid is delivered is the perception that decades of ‘capacity-building’ has not resulted in the sustained institutional development necessary for the planning and implementation 164
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