The 2019 Financing for Sustainable Development Report (FSDR) of the Inter-agency Task Force, whose fourth edition was released today, reviews the global financing landscape to make recommendations for governments. It puts special emphasis on the five Sustainable Development Goals under review at the High-Level Political Forum this July, which includes the education goal, SDG 4.
Ahead of the Spring Meetings of the World Bank and IMF and the United Nations ECOSOC Forum on Financing for Development, the 2019 FSDR assesses the global macroeconomic context and progress towards the commitment to establish national integrated financing frameworks that was made in the Third International Conference on Financing for Development in 2015 (known as the Addis Ababa Action Agenda). It discusses the seven action areas of the Agenda, ranging from domestic public resource to international development cooperation.
The 2019 FSDR emphasizes the financing gap for education using our 2015 policy paper, with least developed countries needing to increase their annual spending on education by three times in order to achieve universal pre-primary, primary and secondary education. The IMF used these calculations to show that the SDGs on education, health, roads, electricity, water and sanitation for 155 developing countries would require additional spending worth $2.6 trillion by 2030.
We are also pleased to see that the 2019 FSDR adopts the GEM Report’s perspective of looking at all three sources of funding that can fill this gap: governments, households and donors.
Government spending on education is by far the most important source of funding, accounting for around 8 out of every 10 dollars spent. Poorer countries prioritize education more in their public expenditure, but this still translates into vastly smaller expenditure by student— less than $200 annually per primary school student in low-income countries, compared to around $8,000 in high-income countries.
Today’s publication also picks up a message we have been touting for many years about the large share of the bill that households are having to pick up for education. In some developing countries, households account for more than half of all expenditure, compared to less than 15% in most developed countries. In Uganda households account for 63% of the country’s total education spending. Household spending accounts for a significant share in some middle income countries, including El Salvador (50%), Indonesia (49%) and Peru (45%).
This price barrier can be too much for the poorest and requires some re-thinking. The 2020 GEM Report will be looking at inclusion in education, putting a spotlight on how financing can be more equitable. Today’s publication features the case of Chile, which undertook a broad reform of its tax system in 2014 to permanently increase public spending on education, especially at the higher education level.
The 2019 FSDR also looks at the importance of remittances for education being sent back home by migrant workers. Our last Report showed the potential of these remittances for even greater impact on education financing: lowering the transaction costs of remittances from 7.1% to the SDG recommended 3% would provide US$1 billion for education. A recommendation from our report is aligned with today’s publication, which is calling for improved financial education initiatives for migrants and their families. This could go a long way to improve their understanding of remittance channels and costs, including exchange rates and fees; to date, less than one third of adults are financially literate in the top remittance-receiving countries.
The 2019 FSDR highlights that development aid for education has plateaued since 2009 at about $11 billion to $13 billion per year, having doubled in the early 2000s. The share allocated to least developed countries fell from a peak of 47 % in 2004 to 34 % in 2016, quoting GEM Report figures; the latest iteration of this annual policy paper reporting on 2017 figures on aid to education is due next month.
The 2019 FSDR refers to the proposed International Finance Facility for Education, which it describes as being “difficult for some countries, especially given the recent rise in debt burdens”. It cautions that a debt-funded education system may be risky for education, which sees returns on investment materialize only over the long term. It also calls on donors to improve coordination across different international funding mechanisms to avoid duplication and fragmentation.
Lastly, the publication looks at the challenge of improving the availability of reliable, national, disaggregated education data. The UNESCO Institute for Statistics (UIS) is highlighted for its work engaging with national statistical systems to provide statistical capacity development support, including on the definition of a National Strategy for the Development of Education Statistics to improve national education data. But collecting the necessary data for the Sustainable Development Agenda requires the current share of statistics in total aid to double from 0.33% to 0.70%.
More effective and inclusive finance is the name of the game for success in achieving our education goal. Antonio Guterres, Secretary-General of the United-Nations, warns in his foreword that “Trust in the multilateral system itself is eroding, in part because we are not delivering inclusive and sustainable growth for all.” The challenge is clear. And now we must meet it.