EDUCATION FINANCE WATCH 2023 Key Findings about Education Financing The Education Finance Watch (EFW) is a collaborative effort between the World Bank (WB), the Global Education Monitoring (GEM) Report, and the UNESCO Institute for Statistics (UIS). The EFW aims to provide an analysis of trends, patterns, and issues in education financing around the world. © Vincent Tremeau | World Bank | 2020 There is a strong commitment to education. Even so, it is Figure 1. Total real spending on education began to increase in 2021 following a brief period of stagnation important to distinguish between a country’s commitment due due to the COVID-19 pandemic to education and the resources it has available to invest. a. Government, ODA, and household spending on The pandemic caused significant learning losses that will education, constant 2021 US$, trillion, 2012 - 2021 harm the future of people and economies alike if the right 6 5.4 5.2 5.3 5.3 5.1 investments in education – in terms of amount, efficiency, 5 4.6 4.7 4.9 4.8 4.9 and equity – are not implemented now. 4 1. The pandemic exacerbated the global learning crisis and Trillion $ 3 government education spending is insufficient to close the 2 learning gap. Along with a slight rise in annual real spending on education, government per-capita education spending increased 1 in 2021. This is striking, given that it occurred during the height of the pandemic. However, spending as a percentage of gross 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 domestic product (GDP) declined in all country income groups, Government Development Assistance Household Total except low-income countries. Government spending on education has historically accounted for less than half of combined b. Evolution of total real education spending (all sources), education spending (a total of government, aid, and household by country income group 2012 – 2021 (2012 = 100) spending) in low-income countries but reached 50 percent in 170 LIC: Low-income countries LMIC: Lower-middle-income countries 2021. In countries of all income levels, particularly low-income 160 UMIC: Upper-middle-income countries HIC: High-income countries LIC, $29 bil and middle-income countries, spending increases were far from 150 sufficient to even make a dent in the large learning gap. LMIC, $454 bil 140 LIC, $18 bil LMIC, $305 bil UMIC, $1.58 tri 2. Now that external support is needed most, Official UMIC, $1.15 tri 130 HIC, $3.17 tri Development Assistance (ODA) is falling – and could be spent more efficiently. Aid to education fell by 7 percent, from 120 US$19.3 billion in 2020 to US$17.8 billion in 2021, because 110 of the reduction in general budget support, which returned HIC, $3.37 tri 100 to pre-COVID levels. ODA for education continues to be important for low-income countries, accounting for 13 percent of 90 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 their total education expenditure; nevertheless, the proportion of ODA devoted to education is declining. Only 30 percent of direct aid to education among the ten largest donors to sub-Saharan Africa goes straight to recipient countries; the remainder is 3. Families spend significant portions of their funds on education; funneled through donors’ aid agencies, international and domestic more than one-third of total education spending in low- and non-governmental organizations (NGOs), and multilateral lower middle-income countries is from households. Within organizations. Since 2017, there has also been a significant countries, household spending varies considerably by household discrepancy between aid commitments and disbursements characteristics. This includes socio-economic status, household among multilateral donors, totaling US$1.7 billion in unused location, education levels, and the type of school children are commitments over the five years. (or are not) enrolled in. Overall, households spend more money EDUCATION FINANCE WATCH 2023 on non-state (private) than state (public) schooling. In selected Figure 3. Education takes a back seat: Widening disparity African countries, it costs families 1.5 to 5 times more to send a in funding priority with health child to a private rather than public school. Share of education sector in comparison to health in sector-specific ODA, 2002-2021 Figure 2. In 2021, for the first time since 2015, government 25.0 Health spending made up 50 percent of total education expenditure in low-income countries 20.0 Distribution of total education spending by source, year, and country income group, percentage, and billions US$ 15.0 2015 11 3 8 2019 13 4 10 income 10.0 Low 2020 13 5 10 Education 2021 15 4 11 2015 219 8 130 5.0 2019 257 162 income 8 middle Lower 2020 260 10 155 Billion US$ 2021 283 9 164 0.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2015 925 3 389 upper-middle 2019 1,016 4 468 income 2020 1,028 5 466 2021 1,085 4 493 2015 2,594 0 486 Figure 4. In 2021, government education spending as a 2019 2,820 0 528 share of GDP increased only in low-income countries income High 2020 2,832 0 503 a. Government education spending as a percentage 2021 2,834 0 533 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% of GDP by income group, 2012-2021 Government Development Assistance Household 5.5 LIMC, 4.8% 4. Demographic changes present challenges and opportunities UMIC, 4.8% HIC, 4.7% HIC, 4.7% for education financing. While more education spending does 4.5 UMIC, 4.5% LMIC, 4.6% not necessarily lead to better education outcomes, learning outcomes are lowest in countries spending the least per school-age child. Low- and lower-middle-income countries exhibit a LIC, 3.6% striking variation in demographic change: some countries are 3.5 experiencing or will soon face a decline in per-capita public education expenditures partially caused by a growing school- LIC, 3.1% age population, while others are seeing school-age population 2.5 stagnation or decline and could free up fiscal space to increase 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 per-capita education expenditure. b. Government education spending per capita (constant 5. Closing the learning gap will require more efficient and 2021 US dollars) by income group, 2012-2021 equitable financing. In all countries, particularly those with relatively lower income, the level, efficiency, and equity of 7,507 8,515, HIC education spending is often inadequate to reach learning goals. More money will only partially solve it. In a current climate of increasing inflation, high debt-to-GDP ratios in many countries, and falling ODA, particularly in low-income countries, spending smarter is the imperative and urgent next step. Doing so can 1,195, UMIC mitigate pandemic-related learning loss, helping to develop the 919 foundational skills needed to grow human capital and sustain economies into the future. 296 341, LMIC 6. Education spending data availability has improved considerably, 42 56, LIC yet gaps remain. The actual availability of the latest data for the key 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 education finance indicator, “governmental spending on education as a percentage of GDP,” fell from 76 percent of countries reviewed in July 2022 to just 66 percent in July 2023.