Financial crisis: education budgets weather the storm – so far

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Governments of developing countries have so far managed to protect their education budgets from the crisis rocking the global economy, according to two UNESCO surveys – but for how long?

The Organization launched a quick study in March 2009 to assess the effect of the crisis on education budgets. The resulting report,The Impact of the Crisis on Public Expenditure on Education: Findings from the UNESCO Quick Survey, is based on completed questionnaires from 51 countries. In parallel, UNESCO’s Institute for Statistics (UIS) has conducted an early assessment of the impact of the crisis on public education financing in 16 countries by reviewing official government budgetary documents (Early Impact Assessment of the Global Financial Crisis on Education Financing: Country Case Studies).

Both reports suggest that governments are making real efforts to protect education budgets but express concern about their ability to sustain educational expansion and maintain quality.

They warn that a different picture could emerge at the end of the fiscal year when more countries are in a position to report on actual expenditure for 2009. “Indeed, there is evidence that in some countries examined in the UIS report, revenue collection in the first few months of the current fiscal year is lower than budget estimates,” explains Hendrik van der Pol, UIS Director. “But it is still too early to assess the impact of the crisis on enrolments and household schooling decisions.” Finally, the reports voice concern about a potential drop in external aid, making it all the more difficult for countries to plan education. “We need to be cautious as the effects of the crisis are not yet fully reflected in finance statistics,” warns David Atchoarena, Director of UNESCO’s Division for Education Strategies and Capacity-Building.

“The global economic downturn threatens progress on educational development,” says Mr van der Pol. “Many governments face severe fiscal constraints due to declining revenue.” Citing the UIS report, Mr van der Pol points out that “some countries were so vulnerable to external shocks that their economies were hit very hard whereas other countries were somehow able to absorb the impact. On the other hand, many countries have benefited from quick support from international organizations such as International Monetary Fund to mitigate immediate fiscal constraints.”

Countries heavily dependent on exports or remittances, for example, are experiencing the effect of lower foreign earnings on national budgets, including education. In Sudan and Yemen, for example, the collapse of oil prices is expected to lead to overall budgets cuts, including for education. In Ghana teacher recruitment has been frozen. Pakistan has cut development budgets for elementary education, literacy and early childhood education. On the other hand, in many other countries surveyed, education budgets seem to be protected. In Guatemala, the education budget was exempted from an overall reduction in government spending. In some middle-income countries, notably in Asia and Latin America, education public expenditures are benefiting from large countercyclical measures aimed at stimulating the economy. Kenya, Namibia, and Mexico have been using their stimulus packages to construct new schools and develop educational infrastructures. Egypt has voted a budget that increases education expenditure by 15.5% in 2009 over the previous year.

Can governments sustain educational expansion? “The situation varies a lot based on national contexts. Some countries have reduced their initial budgetary allocations for capital expenditures,” explains Atchoarena. “In some cases this can affect the ability of education systems to sustain longer-term educational development. For example, delaying investment programmes at the post-primary level may not immediately create major difficulties, but in five years’ time the capacity to accommodate the growing number of primary school graduates at secondary and post-secondary levels will be reduced. This will affect educational attainment levels.

“Many governments face a trade-off between maintaining fiscal balance and expanding government expenditure to counter the economic slowdown,” notes the UIS report. Where countries cut education budgets, primary education tends to be more resilient than post-primary levels as the larger proportion of its budget is comprised of teacher salaries, according to the report.  Technical, vocational and higher education tend to consume more non-salary current and capital spending, and are therefore likely to be more affected by the same measure. However, cuts in the non-salary budget also carry a big risk to education quality throughout the system. “Cutting funds from already low levels of non-salary spending could be critical to the quality of education especially if it affects students directly through reduction of textbooks availability, teaching and learning materials, operation grants to schools, school small maintenance, meal services, school health equipment and so on,” UIS warns. While teacher salaries seem to be well protected, on-time payment is still a concern especially when the government sees an acute shortfall of revenue.

When employment opportunities shrink, students tend to stay longer in the tertiary system. Several developed and developing countries are experiencing this increased demand for further education which puts more pressure on education budgets.

“Overall, donors, especially bilaterals, will be less likely to meet their aid commitments at a time when the impact of the crisis on the poorest countries will likely require higher levels of aid,” Atchoarena fears. External assistance plays a crucial role in protecting education gains and supporting countries to achieve Education for All, especially in sub-Saharan Africa. Despite rapid progress towards universal primary education in the region, many countries are still far from achieving the EFA goals by 2015. Most are heavily dependent on development aid for investment in infrastructure.

UNESCO’s Education for All Global Monitoring Report has already advised that increased aid could help to reduce fiscal constraints but development assistance budgets are coming under increased pressure. Aid to basic education already decreased by 22 percent between 2006 and 2007.  The Report estimates that an additional $7 billion is needed in increased aid for low-income countries to meet key education goals.

Previous economic crises show that rising poverty is a threat to education. With increased unemployment and decreased earnings, Atchoarena points out, the opportunity costs of education will increase. “Some parents may even have to take children out of school and send them to work in the informal economy”, he comments. UNESCO and ILO will be sharing information to produce an assessment in the near future which includes the perspectives of both labour and education.

“Available data indicate that many developing countries are making every effort to maintain their budgetary commitments to education,” Atchoarena concludes. “Nevertheless, the monitoring must continue.”

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