A quarterly magazine of the IMF

March 2002, Volume 39, Number 1

At the World Education Forum in Dakar, Senegal, in 2000, officials from 180 countries set a challenging goal: ensuring access to primary education for all children by 2015.

The world has achieved a level of economic prosperity that was unimaginable just one hundred years ago. And yet many people in poor countries still lack the essentials of life. In 2000, an estimated 113 million children worldwide between the ages of 6 and 11 did not attend school.

Human capital—education and skills—is a critical weapon in the war against poverty. If poor countries are to achieve faster economic growth—a necessary condition for reducing poverty—they will need better-educated workforces. Even a primary education can pay off handsomely (Table 1). Investments in primary education have been shown to reap higher returns—estimates range from 11 percent to more than 30 percent—than investments in physical capital. Investment in the education of girls yields especially high returns.

Table 1 Education in low-income countries yields high returns (percent)
	Private rate of return	Social rate of return
Primary schooling Secondary schooling Higher education	26.4 18.5 22.4	20.6 14.1 11.3
Source: George Psacharopoulos, cited in Alain Mingat and Bruno Suchaut, 2000, Les Systèmes éducatifs africains : une analyse économique comparative (Brussels: De Boeck University).

It was in 1990, at the World Conference on Education for All in Jomtien, Thailand, that the international community first agreed to strive for universal primary education. This goal—ensuring that all children would have access to, and be able to complete, a free, compulsory primary education of good quality—was again endorsed in Senegal in 2000.

Although the goal of providing all children with a primary or basic education has received broad national and international support, verbal commitments have not always been translated into much-needed, if difficult and contentious, changes in policy and practice. However, it is still possible to meet the target if the countries themselves take the right measures and if the international community provides appropriate support.

Educational needs

The ideal would be for all children to complete nine years of basic education—a primary education plus a few years of secondary education. Most low-income countries are far from being able to achieve this, however. A more realistic goal would be to provide universal access to six years of primary education, the minimum needed for lifelong functional literacy and numeracy.

The average in countries with per capita GNP below $1,200 is about four years of formal education, although there are large regional variations. Adults in Africa and South Asia have completed about three years of formal education, on average, while those in Latin America have completed nearly six years. There are also wide disparities between different groups in the same country. For example, in many low-income countries, girls lag well behind boys in educational access and achievement. Illiteracy rates for adult women are as high as 80 percent in some countries; this is especially unfortunate, because women's literacy is associated with very high social returns (for example, lower fertility rates and the improved health and nutrition of children). Urban coverage is generally high, even in countries where average enrollment rates are low, indicating that rural groups are especially underserved.

Progress to date

Between 1960 and 1980, all developing regions made substantial progress in improving the gross enrollment ratio—the number of children in school relative to the number of children in the age group for that particular school cycle. After 1980, enrollment ratios continued to improve in all regions except Africa. During the 1990s, however, progress toward universalizing primary education stagnated in many countries and, in some, enrollments actually declined. In the latest year for which internationally comparable data are available (1998, in most cases), a considerable number of countries still had fewer than 60 percent of their primary-school-age children in school.

The gross enrollment ratio tends to overestimate coverage, because it includes repeat students. A more telling statistic is the proportion of the school-age population that actually completes a primary education. Retention rates for poor children are low even in countries with high gross enrollment ratios. The gross enrollment ratio is fairly high in quite a few African countries, yet fewer than half of the children entering primary school reach the final year. Madagascar is a good illustration: almost all of its children enroll in primary school, yet a mere 27 percent of the primary age group reaches Grade 5, and just 11 percent of rural girls complete the cycle. Only 6 percent of youngsters coming from households in the poorest two deciles complete a primary education, compared with 70 percent of the children in the top two income deciles.

There are a number of reasons why primary school completion rates are so low. First, the education provided may be perceived by parents or communities as being of poor quality or of little benefit. Second, the direct and indirect (opportunity) costs may be high, particularly for parents who are economically dependent on the labor of their children. Also associated with low retention rates are high repetition rates, which raise the direct costs of education.

Meeting the target

To achieve universal primary education by 2015, the rate at which out-of-school children are being enrolled in schools will need to be quadrupled, and retention and completion rates for children in primary school will have to improve dramatically, to at least 80 percent. If enrollments in sub-Saharan Africa continue to grow at the pace of 1990-97, only 21 of the 43 sub-Saharan African countries will achieve a primary gross enrollment ratio of 100 percent by 2015; 9 will come close to reaching the target, and the remaining 13 will be far behind. The biggest challenge will be enrolling and keeping girls and children in rural areas in school.

The traditional approach to expanding coverage has been to construct additional schools and classrooms and to recruit more teachers. Such strategies are important, because children will not enroll if there is no school within a reasonable distance of their community. But this alone will not ensure universal enrollment. Often, the direct costs of education (such as tuition, activity fees, uniforms, textbooks, and materials) are out of the reach of the poor. Reducing the direct costs of education is thus very important in drawing children into school. In Uganda, for example, enrollments jumped sharply, by 2.2 million children, after the government eliminated primary tuition fees in 1996. Countries considering eliminating school fees will have to allocate additional resources for education, as Uganda did, to ensure that the school system can accommodate more students and continue to provide a good education. It is also important to ensure that eliminating fees does not have unintended and adverse effects; in Benin, for example, school fees, which were retained by schools, were eliminated for girls but not for boys, so headmasters had little incentive to enroll girls until the government allocated resources from the national budget to cover girls' school fees.

But expanding coverage is not enough. The quality of education also has a strong impact on enrollment and retention rates, as well as on future output and productivity. However, international comparisons of standardized tests show that students in low-income countries acquire less knowledge and fewer skills, on average, than their counterparts in more advanced countries.

To provide children with a high-quality primary education, governments must raise sufficient funds to finance educational inputs—such as better-trained teachers, textbooks and other learning materials, and physical infrastructure. Most developing countries have difficulty raising revenues because of their small tax bases and limited administrative capacity to collect taxes. Moreover, in recent decades, many countries have had to sharply reduce public spending on social programs because of necessary macroeconomic reforms and growing debt-service burdens. In Madagascar, for example, each percentage point increase in debt service as a share of total government spending depressed spending on education as a share of total non-interest government spending by 0.54 percentage points. Between 1991 and 1995, when its debt payments peaked, Madagascar cut government spending on education by half.

At present, public spending on education in low-income countries ranges from less than 2 percent of GNP (Chad, Guinea, Guatemala, and the Lao People's Democratic Republic) to nearly 10 percent (Botswana and Namibia). On average, countries that allocate higher percentages of their GNP to education are able to reach more children, although the percentage of GNP allocated to education is not necessarily a predictor of coverage and quality. El Salvador, Ghana, and Sri Lanka, for example, allocate a relatively small proportion of their GNP to education but achieve relatively wide coverage. Also, beyond a basic level of spending per pupil on education—10-12 percent of per capita GNP—spending has little to do with how much students learn. Senegal and Burkina Faso spend approximately the same amount on each primary student, but academic achievement is much higher in the latter. Sound educational policies that ensure the efficient use of resources are critical.

Governments in many low-income countries have failed to vigorously pursue the specific policies and strategies that would have hastened progress toward universalizing primary education, often because it would have forced them to confront some highly contentious issues, such as the size and structure of administrative services; decentralization; teacher recruitment, remuneration, and deployment; and student repetition rates. Although many low-income countries have started moving in the right direction, stronger leadership and more open communication with all stakeholders are needed.

Countries also need to ensure that resources are allocated fairly and efficiently across localities and individual schools. Some countries—such as Guinea—have fairly consistent patterns of deployment of resources and teachers, while others—for example, Benin, Cameroon, Egypt, Madagascar, Nepal, and Yemen—are less efficient in this area. Countries cannot have efficient school systems if some schools are overendowed with trained teachers while others suffer severe shortages, as is often the case of schools in rural areas and poor urban neighborhoods. Poor school supervision and management can also undermine the educational system.

Another reason that progress has been slow is that donor support, provided mainly through discrete, focused projects, has sometimes had unintended adverse consequences. Ready access to donor resources has also led some countries to undertake school construction that is too costly to be sustainable. A second unintended consequence has been a fragmentation of education sector policy and an increase in the administrative burden of recipient countries dealing with a multiplicity of educational projects supported by different donors.

Instead of financing specific projects, donors should be providing support for policy formulation and sectorwide programs. The international community has an important role to play in gathering information across countries to identify effective practices. Although it generally contributes less than 5 percent of the funding for education in low-income countries, the international community can leverage these resources to catalyze change and encourage the adoption of new policies.

Table 2 Primary school enrollment rises in developing regions, but completion rates are low   Source: World Bank.   Note: .. means data not available.

The financing gap

How much more funding will low-income countries need to come up with to achieve high-quality universal primary education by the target date? One way to arrive at a gross estimate of the financing gap, the approach advocated by the World Bank, is to estimate how much funding countries can mobilize domestically and how much can be garnered through improved efficiency in their educational systems, and then to assess shortfalls given the projected number of out-of-school children in 2015.

Countries can mobilize national resources from the public budget and from extrabudgetary sources, including contributions from the private sector, local communities, and users. However, given that a primary or basic education is a public good and that the goal is to achieve free universal access to, and completion of, such an education, private financing should necessarily play a minor role at the primary level.

Efficiency and quality improvements can profoundly influence the size of the financing gap. In most countries, the biggest educational expenses are teacher salaries and school construction. Usually, teacher salaries account for more than 80 percent of recurrent expenditures on primary education, while school construction accounts for the bulk of capital costs. Teachers in many low-income countries are civil servants; frequently, civil service salaries are either too high or too low compared with salaries for other workers. The average teacher salary is more than six times per capita GNP in the Sahelian African countries but only two and one-half times per capita GNP in Latin America and Asia. Experience shows that the only countries where public spending on education is less than 6 percent of GNP that have achieved universal primary education are those that have kept teacher salaries at less than 3.8 times per capita GNP. No country has achieved universal primary education when teacher salaries have been above this level; the drain on education resources has been so great that coverage could not be extended to all children.

There is also often room for improved efficiency in school construction. Considerable savings can be achieved by rationalizing and modifying school construction. Contracting school construction out to the private sector can help reduce costs.

Efforts are under way to assess the financing gap related to achieving universal primary education globally. Some regional estimates, however, provide a snapshot of the size and nature of the gap. Analyses undertaken in the course of preparing Poverty Reduction Strategy Papers (PRSPs) in Burkina Faso, Guinea, Niger, and Senegal, for instance, show that the financing gap for the four countries together totals $487 million a year, assuming they attempt to achieve universal primary education by 2015 without changing their current policies. However, changes in policies can significantly affect the size of the financing gap. If these four countries introduce policy changes to improve the quality of education, the financing gap will jump to $683 million. But if they also adjust teacher salaries to benchmark levels—so that they are around 3.8 times per capita GNP—the financing gap will drop to $394 million. And the financing gap will fall further, to $258 million, if they are able to mobilize additional public resources for primary education, in particular through debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative launched jointly by the World Bank and the IMF in 1996 and enhanced in 1999.

Each of the countries needs to pursue a different strategy if it is to universalize primary education and work within a reasonable and sustainable financing framework. Senegal, with a financing gap of $62 million, needs to increase spending to improve educational quality. Niger, with a gap of $41 million, already allocates sufficient resources for educational quality, but needs to change its input mix and general education policies and lower teacher salaries so they are more in line with benchmark levels. By contrast, Guinea, with a gap of $39 million, needs to raise teacher salaries.

Positive developments

The good news is that recent developments should make it easier for low-income countries to move toward universalizing primary education. One of the most significant is the HIPC Initiative. Some of the resources that become available as debt is cancelled are being allocated to the social sectors, including education. In Madagascar, the proportion of GDP allocated to education is expected to increase from 2.2 percent to 3.4 percent. Of this increase, 0.4 percentage point will come from resources freed up under the HIPC Initiative, and 0.8 percentage point will be met from an increase in public allocations to education.

The preparation of PRSPs—initially undertaken as part of the process of qualifying for debt relief under HIPC but now a much more widely used instrument—is a central tool for addressing needed policy changes in education. PRSPs make it possible to consider educational resources, policies, expenditures, and expected outcomes in the context of a country's macroeconomic, social, and poverty-reduction goals. A country's preparation of a PRSP, in collaboration with the World Bank and the IMF, engages a broad base of stakeholders within the country itself, increasing local ownership of the strategy and transparency in policy formulation. The PRSP process also builds the political support necessary for reforms and facilitates partnerships between donors and other international players. Regular updating of the PRSPs helps ensure that progress is monitored and that policies and strategies are adjusted as necessary.

It remains to be said that building human capital will not, in and of itself, bring about economic growth and poverty reduction. Economic growth results from the interplay of investments in human, physical, and institutional development. The interaction of education with other investments—such as the construction of roads to markets, the establishment of microcredit schemes, and the provision of agricultural extension—is very important in ensuring that the returns to education are realized and the condition of the poor improved. Yet a country's provision of a quality primary education to all its citizens is a critical cornerstone in achieving economic growth with equity.