As usual on Fridays, from Raj Nallari  and Breda Griffith's lecture notes on Economic Policies for Poverty Reduction.
Official Development Assistance for Education
In order to achieve the MDG in education, external financing from the donor community will need to be stepped up. Furthermore, based on the needs assessment of developing countries, a better targeting of assistance is required as well as a change in the mix of assistance and a greater efficiency of aid transfers (Bruns, Mingat and Rakotomalala (2003). Recent developments such as the HIPC Initiative (1999), the PRSP process and the Fast Track Initiative (2002) should make it a little easier for developing countries to move towards UPE.
Under the HIPC Initiative  some of the resources that become available when debt is cancelled are available for increased social spending. Mingat and Winter (2005) note that in Madagascar education spending as a proportion of GDP is expected to increase from 2.2 percent to 3.4 percent in 2005, with about a third of the increase arising from resources freed up under HIPC. Fredriksen  (2005) notes that countries benefiting from HIPC have committed to use an average of 40 percent of their debt payments savings on basic education. A recent review shows that countries are largely meeting this commitment. Furthermore, the preparation of the PRSP make it a central instrument for government to identify and address policy reform for education in the context of a country’s macroeconomic framework and its social and poverty reduction goals.
The Education for All (EFA) Fast Track Initiative (FTI)  was agreed by developing countries, donor countries and agencies in 2002. Its aim is to help achieve the goal of universal primary school completion by boys and girls by 2015. The FTI functions as a co-coordinating mechanism for disbursing funds once a country has been accepted to the FTI (by submitting a country plan for education). It meets regularly to review education plans at the international and country levels and thus is an important forum for debating what works and does not work in achieving EFA. FTI has co-ordinated with UNESCO to develop uniform benchmarks for an EFA plan. The suggestions include the allocation of 20 percent of national budgets to education, the elimination of school fees, a target of 40:1 student-teacher ratio and repetition rates not above 10 percent. The FTI has been instrumental in mobilizing more resources as well as promoting more effective resource use through better programs and closer donor coordination, but has been criticized for not doing more to bridge the financing gap (Sperling and Balu , 2005).
Despite increases in commitments of US$348 million in 2005 to 12 countries included in the initiative, an annual financing gap of US$289 million remains. Moreover only 8 of the countries identified as being off-track for reaching UPE by 2015 are included in the FTI. However, the reality is that donors only give US$1.9 billion for education worldwide while the gap between what countries spend and what they need for UPE ranges from US$5 billion to US$10 billion. Sperling and Balu (2005) note further that no donor country has made FTI or even EFA a high priority, although some recent initiatives such as the UK’s Commission on Africa and the UN Millennium Project Task Force on Gender Equality and Education issued reports calling for predictable funding through the FTI.
External levels of financing have increased for education, although current levels of aid fall far short of requirements. Under IDA, lending for education has grown steadily to almost US$1.2 billion in 2004. Roughly 86 projects were under implementation in 2005 amounting to nearly US$4.3 billion. Africa accounted for 40 percent of the total and Asia accounted for 20 percent. Support for primary education amounted to almost half of total lending over 1999 to 2003.
Africa has the greatest disparity between current levels of assistance and what is needed to achieve UPE by 2015. 33 African countries account for US$1.9 billion of the US$2.4 billion per year gap (excluding Afghanistan); yet official disbursements have averaged US$500 million per year over 1998 to 2000, with new commitments averaging just US$600 million per year.
Official Development Assistance to Basic Education in Sub-Saharan Africa, by Donor, 1998-2000 (commitment basis, millions of current US$)
Next week we will start looking at the relationship between health, poverty reduction and economic growth