Building peace in the minds of men and women

Aid to education: a return to growth?

01 June 2018

The latest policy paper released by the Global Education Monitoring Report (GEM) shows that aid to education has reached its highest level since records began in 2002. Between 2015 and 2016, it grew by US$1.5 billion, or 13%, to a record US$13.4 billion.

Two-thirds of this increase are accounted for by an increase in aid to basic education. After nearly a decade of stagnation, basic education aid increased by 17%, from US$5.1 billion in 2015 to US$6 billion in 2016. Aid to secondary and post-secondary education also increased, but by a smaller amount, with the result that basic education’s share in total aid also reached its highest level at 45%. 

Where is the increase coming from?

The United States, the United Kingdom and the World Bank account for almost half of aid to basic education. By contrast, in terms of the share of national income allocated to aid to basic education, Norway is at the top of the donor scoreboard, for example spending twelve times more than the United States in relative terms.

While fewer than one in two young people finish secondary school, good results are within reach. If all developed countries and some emerging economies committed, like Norway, to allocate 0.7% of their national income to aid and 10% of their aid portfolio to education, then the funding gap for achieving universal secondary completion could be filled.

The education of the poorest children is still not being prioritized

The changes in aid levels still show few signs of prioritization of education in countries most in need. Less than a quarter of basic education (22%) went to low income countries in 2016, in comparison to 36% in 2002. The share going to the least developed countries, meanwhile, has increased slightly from 31% to 34% – yet is still well below the peak of 47% reached in 2004. The shortfall reflects the disappointing long-term decline in the share allocated to sub-Saharan Africa, which is home to half of all out-of-school children worldwide, and yet continues to slip down donors’ list of priorities. The region used to receive half of the total aid to basic education, but it has received a smaller and smaller share of the pot for seven years in a row, reaching just 24% in 2016. Part of the decline is explained by the increase in the share of aid that is unallocated by region. This includes aid channeled through the Global Partnership for Education (GPE). 

A need for more external financing for education in lower middle-income countries  

While much of the finance gap for low-income countries could be bridged by reforming current aid allocations, and re-directing aid to basic and secondary education, this would not address the considerable education challenges facing lower middle-income countries. The paper finds that more than a third of the aid allocated to lower middle-income countries comes in the form of concessional loans but that the cost of non-concessional credit deters many countries from borrowing for education.

What does this all mean for the funding gap in education?

The 2016 increase in aid to education is welcome even if it is well below the level identified as necessary to cover the cost of reaching the ambitious SDG 4 targets. It also needs to be sustained for several years just to make up for the stagnation over 2010–2015. In 2015, The GEM Report estimated that an annual funding gap of at least US$39 billion per year would persist in 2015–2030. Closing the gap would require a six-fold increase in levels of aid.  In February 2018, GPE secured pledges to replenish its fund for 2018–2020. In 2016, it disbursed US$351 million to low income countries out of total disbursements worth US$497 million.

The expansion and deepening of multilateral financing institutions targeting education also offers hope for more progress. Adequate external financing opportunities for education should be available to both low and lower middle-income countries. However, more remains to be done to ensure that aid goes where it is most needed and that the appropriate coordination mechanisms are in place.