Governments in low-income countries are spending more on education, but more funding is needed for children who receive the least

By Luis Benveniste, Global Director for Education, World Bank and Stefania Giannini, Assistant Director-General for Education, UNESCO

Education is not only a fundamental human right but also a key investment in human capital that translates into economic growth and other development outcomes. Keeping children in lower-income countries in school longer is one of the best global investments that can be made. Returns to education, particularly at higher education levels, are highest in low-income countries.

The World Bank and UNESCO latest Education Finance Watch (EFW) report offers some encouraging news: government spending on education in low-income countries as a percentage of GDP rose from 3.2 percent in 2018 to 3.6 percent in 2021, at the height of the global COVID-19 pandemic. While still below the international benchmark of 4 percent of GDP, for the first time, government spending on education accounted for over half of all spending on education in these countries.

Nevertheless, official development assistance (ODA) to education, which accounts for 13 percent of spending in low-income countries, shrank by 7 percent and households continue to bear a large burden of education costs (over one-third).

International aid has stagnated

Despite international calls for more education financing, the portion of international aid allocated to education has stagnated in recent years, reaching a low point of 9.7 percent in 2013 and 2015, a point it returned to in 2020-2021. Donors, not surprisingly, funneled money towards health during the pandemic.

Figure 1. Education takes a back seat: Widening disparity in funding priority with health

Share of education sector in comparison to health in sector-specific ODA, 2002-2021

Note: Amount is disbursement base
Source: Own estimates based on the OECD CRS database (2023)

At the same time, just 30 percent of direct aid to education among the ten largest donors to low-income countries in sub-Saharan Africa went straight to recipient countries; the remainder was channeled through donors’ aid agencies, international and domestic NGOs, and multilateral organizations.

An important concern is also that, as pandemic-induced school closures exacerbate the learning crisis, and governments and households face ongoing inflation, a significant amount of aid committed to education has remained unspent: Since 2017, $1.7 billion in aid commitments to education have not been disbursed.

How can education financing be better spent?

Except for low-income countries, government spending as a percentage of GDP declined in all country income groups in 2021.

The amount a country spends on education per child is the most direct measure to assess whether sufficient resources are devoted to education. While it is difficult to establish a benchmark for the cost of ensuring quality education in different countries and contexts, comparisons are informative. Since 2012, government spending per capita has increased in countries of all income levels, but high-income countries, in part due to decreases in their school-aged populations, have improved spending per child more (by an impressive USD $1,008 per child) than low-income countries (by just USD $14 per child) whose school-aged populations continue to expand.

Figure 2. In 2021, government education spending as a share of GDP increased only in LIC

Note: Estimates on spending as a percentage of GDP include interpolated values. Interpolation used to fill in missing data and ensure a comparable sample of countries in all periods.
Source: Author estimates using the EFW2023 database

Increasing education spending per capita is imperative. While more education spending will not necessarily lead to better education outcomes, learning is lowest in countries spending the least per school-age child. Low- and lower-middle-income countries exhibit striking variation in demographic change: In countries where population growth continues, securing increasing financing for education on a per capita basis will become more important, and more challenging. In countries with shrinking school age populations, opportunities to invest more in the education of each child offer opportunities to raise learning outcomes without disrupting the bottom line.

In a current climate of increasing inflation, high debt-to-GDP ratios in many countries, and falling ODA, particularly to low-income countries, targeting education spending to the children currently receiving the least is the imperative and urgent next step. Doing so could mitigate pandemic-related learning loss, helping build the foundational skills needed to grow human capital and sustain economies into the future.

 

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