A quarterly magazine of the IMF

June 2005 , Volume 42, Number 2

Free, quality universal basic education is achievable

The state of education in the world is a silent emergency—over 100 million primary school-age children are out of school, 150 million children in school are likely to drop out before completing primary school, more than half of all girls in Africa never enroll in school, and less than one-third of children in Africa and South Asia can read and write. While CNN cameras will never capture a child dying from lack of education, every day children die from AIDS, malnutrition, and other conditions that might have been prevented had their mothers had a chance to complete a quality basic education.

When the global community established universal primary education as a Millennium Development Goal (MDG), and more than 180 nations signed on to even broader goals at the World Education Forum in Dakar in 2000, it represented a clear political commitment to develop a global compact to achieve "Education for All." While some have defined the goal as primary education, constituting 5 years of schooling, we and a growing number in the education field have defined the challenge as quality universal basic education—which calls for 8 years of education. At the heart of this compact, as indicated in the Dakar Framework of Action, was an obligation for developing nations to create an education plan with adequate domestic resources, political leadership, governance reforms, accountability, and transparency, as well as special initiatives to reach girls and other vulnerable children, such as children with disabilities, refugees, orphans, and those impacted by HIV/AIDS. This principle of national ownership and commitment to reform was deemed essential not only for any major expansion of quality basic education but also for convincing donor nations that extra resources would be effectively employed.

If the international community seriously wants to achieve a global compact, the question is how the donor component can be structured to maximize incentives for developing countries to both attempt and succeed at ambitious expansions of free, quality universal basic education. This article explores the elements of a successful compact: its precise structure, the guiding principles, and how to include the right incentives.

Critical ingredients of a compact

International development discussions are often locked in an impoverished debate over whether money or reform is most critical to achieving universal basic education. The reality is that both are essential, so the compact must be structured to spur reform and fund worthy plans. With this in mind, the first key ingredient is creating a reliable, long-term contingent commitment of resources. Contingent funding only releases financing to countries after they have developed and instituted the political reforms and resource allocations necessary to implement credible education plans. The prior and reliable nature of the commitments provides countries the assurance that if they fulfill their obligations and pursue reforms, donors will deliver promised funding. The contingent aspect assures donors that funds will only begin flowing when countries develop and implement quality education plans. Such commitments are vital for several reasons.

• Ensuring that major expansions do not reduce quality. Without significant contingent commitments from donors, those countries that undertake a major expansion of access to education can suffer serious declines in quality—the student-teacher ratio may zoom to 100:1 from 50:1 in ill-equipped classrooms. The heads of state in Uganda, Kenya, and Tanzania all made major commitments in recent years to abolish fees and saw enrollments skyrocket by millions overnight. In Uganda, enrollment rose in 1996 from 3.4 million to 5.7 million students; in Kenya in 2003, from 5.9 million to 7.2 million students; and in Tanzania in 2002, from 1.5 million to 3 million students.

While millions of poor children have clearly benefited from the elimination of these financial barriers to schooling, such dramatic expansions without an equivalent boost in resources to compensate for lost fees and support the increased numbers of students can create a quality dilemma. In Uganda, for example, while more students gained access, the explosion in class sizes—without more external assistance—caused a significant drop in the percentage of students receiving satisfactory scores in mathematics and English. The answer to this dilemma is neither to forgo such admirable efforts to eliminate fees nor to discourage such leaders from seizing critical political moments to push their nations toward universal basic education. Instead, what is needed is substantial contingent donor funding to encourage well-planned expansions.

• Encouraging reforms with long-term funding for recurrent costs. Dramatic expansions of primary school completion can only be accomplished with a comparable expansion in the number of teachers. Yet teacher salaries constitute the largest component of an expansion—usually averaging over 80 percent of education budgets in major developing nations—and they are recurrent costs. As a result, countries hesitate to hire the extra teachers necessary to expand quality education because of both a lack of resources and a lack of certainty about the durability of those resources.

Even where significant donor funding is provided, the short-term nature of such funding discourages countries from proceeding with major teacher expansion. Many donors, from the World Bank to the U.S. Millennium Challenge Account, commit funding in three-year grant cycles. Yet, because it can take two to three years to simply recruit, train, and locate teachers in rural areas, developing nations often do not embark on major expansions because they fear that funds will be cut off just as they have finally deployed teachers to critical areas. The Minister of Education of Rwanda told us there is even a name for this: "aid shock." In addition to the constraint of three-year grant cycles, development assistance often will not help fund teacher salaries because it is a recurrent cost. The World Bank awarded Kenya´s education system a $50 million, three-year grant in 2003—but the grant was focused on building schools or buying textbooks and did not cover teachers´ salaries.

• Empowering reformers and creating positive competition. As the expansions in basic education call for major upfront investments, but deliver returns only over a generation, large-scale education reform often loses out to an immediate crisis or tangible infrastructure project that a political leader can take credit for during his term. Certain, contingent funding is critical because it provides reformers within and outside of governments with the leverage to push for difficult reforms with the confidence that these reforms will at least win external financial support. Furthermore, when a country sees its neighbors winning resources after committing to specific universal education reforms, it begins a competition with its neighbors to pursue equally ambitious and difficult reforms—as happened after debt relief was expanded in 2000.

The second key ingredient is getting donors on the same page—that is, harmonizing expectations and standards and coordinating funding. A credible global compact forces donors to establish a common set of standards for countries, which sends a clear message to countries about their obligations. It ensures that countries do not waste time submitting multiple applications and reports to donors. It ensures that donors are not duplicating projects or tripping over each other to support narrow pet projects. And it encourages donor coordination at the country level to review plans and coordination at the international level to decide which countries receive priority funding.

Global fund or virtual fund?

Donors and advocates over the past few years have debated the best structure for financing and coordination, revolving around two models: a global fund for education, or a "virtual fund" that coordinates donor financing.

A global fund for education, modeled on the Global Fund to Fight AIDS, Tuberculosis, and Malaria, would provide several unique benefits. It is easy to communicate—a global education fund would clearly focus donor and public attention on universal basic education and the financing gap to achieve it. It offers a degree of independence and flexibility that bilateral funding may not have on its own, by creating a separate governing structure. It promises a level of rigor and developing country involvement through peer review of countries´ funding proposals and national plans. Finally, it easily pools resources, from both governments and private sector donors, who are not yet large-scale players in global education.

But such a fund, free of individual donor nations´ control, is a double-edged sword. The lack of control over the distribution of funds can be a disincentive for serious resource commitments from major donors. Many advocates and development officials also are skeptical of the virtues of building extra bureaucracies or fear a long time lag for fund disbursals.

The virtual fund idea is to create a process for donors to coordinate funding through existing bilateral and multilateral institutions without ceding control over development assistance to a new fund. This model responds to donors´ and advocates´ concerns on multiple levels. It avoids creating a new bureaucracy with unnecessary overhead. It requires a common set of benchmarks for countries´ plans. And it avoids duplication of projects through a donor review of plans at the country level that is triggered by countries´ proposals and realistic estimates of their financing gap.

But while a virtual fund may be a suitable compromise for donors, it presents its own challenges. Donor control means that plan reviews are not independent and donors´ interests, rather than countries´ education policy needs, may influence funding priorities. In addition, the role of a virtual fund is simply difficult to explain or communicate to the public and even to developing countries.

Following the Dakar forum, a couple of proposals emerged for a global fund on education, including a proposal by one of the authors (Sperling, 2001). Yet the idea of a global fund received a cool reception not only from donors but also from developing countries and advocates who spoke of "fund fatigue" after the successful effort to establish the current global health fund. At a high-level meeting of donors and developing countries and nongovernmental organizations (NGOs) in Amsterdam in early 2002, such resistance led to a proposal for a virtual fund, which was adopted by the Development Committee in April 2002. NGOs and developing nations then successfully pushed the World Bank to "fast-track" a few countries for funding—leading to the name the Fast Track Initiative (FTI).

Assessing the Fast Track Initiative

Has the FTI, still a work-in-progress, fulfilled the two key requirements for a global compact on education? On the coordination and standards front, it has been successful in a number of ways.

• The FTI is now an ongoing institutional structure, led by the Group of Eight chair each year, which meets regularly to review education plans at the international and country levels.
  
  
• Donor representatives jointly review a country´s plan, recommend to the FTI partnership whether the country should join the initiative, and coordinate on funding. In Honduras, for instance, Japan and Canada collaborated to fund additional teacher training and textbooks to help it achieve its Education for All plan.
  
  
• There has been a coordinated effort with UNESCO to develop uniform benchmarks for what constitutes an acceptable Education for All plan. For example, the FTI benchmarks suggest the allocation of 20 percent of national budgets to education, the elimination of school fees, a target of 40:1 student-teacher ratios, and repetition rates not above 10 percent. While these benchmarks are still being debated—there has been some controversy about specifically limiting teacher salaries to a multiple of per capita GDP—the benchmarks at least provide a framework for discussion and evaluation.
  
  
• Without the FTI as a coordinating mechanism there would be no ongoing structure to even debate what is and is not working in the development of a global compact on education.

While the FTI has proved successful at disbursing funds to countries, it has not come close to providing certain, contingent funding. On the positive side, France, the Netherlands, and the United Kingdom, together with several other donors, have committed $348 million in 2005 to 12 countries endorsed by the initiative—although there is still an annual financing gap of $289 million. To respond to countries without existing donor sponsors, donors established a mini-global fund called the Catalytic Fund to support such donor orphans with short-term, stop-gap funding. It is scheduled to disburse around $30 million this year to seven countries, with a goal of $292 million over three years.

On the negative side, these amounts comprise only a small down payment on what is needed to meet the universal basic education goal. The gap between what countries spend on education and what they need from donors ranges from $5.6 billion (to cover six years of education) to as much as $10 billion to cover the full eight to nine years needed for universal basic education. Yet, collectively, donors give just $1.9 billion for education worldwide. Moreover, they have mostly funded smaller countries (such as Guinea and Niger), sometimes with a two-year lag. Stronger, quicker disbursal is necessary to create positive incentives for others to embark on large-scale reform. In addition, of about 80 low-income countries that are off track for reaching the 2015 goal, only 8 are currently covered by the FTI.

But disappointment with the lack of sizable funding has led to misplaced criticism of the FTI. It is critical to recognize that no structure could succeed on the contingent commitment side without significant resources from the heads of state and finance ministers of the major donor nations. Indeed, the multilateral FTI has been successful in setting up a structure and funding several countries in its first couple of years—which compares quite favorably with a single-nation initiative like the U.S. Millennium Challenge Account, which took three years to sign its first disbursement agreement.

While the Netherlands is providing a major amount to education in terms of its national income, no head of state in a Group of Seven country has made the FTI, or even a compact on education, a high priority and taken leadership to encourage the donor community to provide the additional $7 billion to $10 billion to make universal basic education by 2015 viable. Recently, however, key entities such as U.K. Prime Minister Tony Blair´s Commission on Africa, and the UN Millennium Project Task Force on Gender Equality and Education issued reports calling for certain and predictable funding through the FTI. The Africa Commission specified at least $7 billion to fund nine years of education in Africa alone, and U.K. Chancellor of the Exchequer Gordon Brown has highlighted long-term funding for basic and secondary education as a compelling argument for his International Finance Facility proposal.

Recommendations

After missing the first of two MDGs on education—that countries achieve gender equity in schools by 2005—and with a major expansion of large countries entering the FTI, the donor community faces a critical test in 2005, which it could pass if it acts on the following three recommendations:

Donors should commit funds and work within the Fast Track Initiative. As the FTI is the only current global framework for coordinating and disbursing education assistance to developing countries, donors should prioritize FTI countries and ensure that the FTI grows from a modest initiative into a fully funded global compact. To the degree that criticism of the FTI exists, donors should seek reforms to strengthen and expand its role as a global compact on education—not to dismantle it or turn it into a pilot program.

We need a major increase in contingent funding in 2005 to support 25 new countries entering the FTI. These African and Asian countries—representing at least 50 percent of the world´s 104 million out-of-school children—are potentially eligible for funding. The World Bank has predicted that these 25 additional countries and the existing 12 will require at least $2.3 billion a year for just primary education—an estimate that looks rather low. The new group includes major African nations, such as Ethiopia, Senegal, Mozambique, and Kenya, as well as Pakistan, which alone could require $400 million a year in external financing. Ethiopia, which has already been endorsed, projects a financing gap of nearly $114 million this year with more than several million children out of school. Providing full support for these large countries´ plans will not only help their children who are missing an education but will also set a powerful example for others that strong Education for All plans and efforts at reform will be supported by donors. It is crucial that the Group of Eight take leadership on providing contingent financial commitments, which over time need to reach $7 billion to $10 billion annually to achieve quality universal basic education by 2015.

We need to commit to predictable, long-term financing for recurrent costs. At this year´s High Level Forum on Aid Effectiveness, donors took an important step forward by agreeing that aid should be stable, predictable, and arrive when promised. Donors should pledge predictable and adequate funding to close the education financing gap in developing countries in time to meet the 2015 goal. The commitment of aid needs to go beyond two- or three-year blocks of funding and instead come in five- to ten-year cycles. Even if funding is initially given in three-year cycles, donors should be clear that funding could be renewed for six- and nine-year horizons as long as developing nations fulfill their commitments under their Education for All plan. Donors should also loosen their restrictions and provide for teacher salaries in countries that provide strong mechanisms and show efforts to bring down costs, but still struggle with spending the majority of their budget on recurrent expenses such as teacher salaries.