Domestic Resource Mobilisation for Education: What Should the Global Partnership for Education Do in Its New Strategy?

This NORRAG Highlights is contributed by David Archer, Chair of the Strategy and Impact Committee of the Global Partnership for Education. In the context of COVID-19, the role of domestic resource mobilisation is more critical than ever before. In this blog post, the author shares his views and reflections on what the GPE strategy should do in this text circulated to the latest meeting of GPE Board of Directors. Its contents and views do not necessarily reflect that of GPE.

1. INTRODUCTION

The Education Commission estimated that 97% of resources for education would need to come from domestic resource mobilisation[i] and in recent months the Global Partnership for Education (GPE) has consistently recognised that domestic financing needs to be a major priority in its new five-year strategy. COVID-19 adds urgency to this as the impact on public finances in developing countries will be unprecedented, creating new challenges for mobilising domestic resources. So what can GPE actually do in its new strategy to make a serious difference?

In short, GPE must engage with Ministries of Finance in a systematic and sustained way and must move beyond its present focus on the share of the national budget for education, to address broader strategic issues that affect the size of the government revenue for public services overall. GPE must engage at both national and international levels in the crucial debates that shape the financing environment for education and other public services.

2. THE SHARE OF BUDGETS IS NOT ENOUGH

GPE has made it a requirement that countries must maintain or increase their own domestic funding for education towards or above 20% of national budgets. This is an important first step and in the last replenishment meeting developing countries pledged to increase domestic funding by about $30billion over three year based just on this measure. However, a 20% share of a small pie is a small amount and GPE is doing nothing to address the size of the pie. Moreover, GPE is measuring the share of the budget to education after debt servicing which is deeply problematic as this shifts the established measure that has been used and it render the profound impact of the new debt crisis on education invisible. Moreover, fighting for a greater share of national budgets, too often sets education advocates against health or water or other public service advocates who are scrambling for a bigger share of meagre budgets themselves. It makes more sense to find common ground with other public services and to address strategic financing issues affecting the size of budgets for every sector.

3. FOCUS ON THE TAX BASE

The biggest determinant of the size of the overall national budget is the tax base of the country, most simply measured by the Tax-to-GDP ratio. On average low-income countries have a 17% Tax to GDP ratio, whilst OECD countries have 34%. UNCTAD and Thomas Piketty concur that the bare minimum for building a viable social state is 20% and that more is needed to provide quality universal services. It should be no surprise that the two countries with the largest number of children out of school – Pakistan and Nigeria – have the lowest tax to GDP ratios (under 10%). The IMF estimates that most countries could increase their tax to GDP ratios by 5% in the medium term.[ii] ActionAid has illustrated how this can be achieved in a progressive way[iii] – ensuring that the burden falls on those most able to pay rather than further disadvantaging the poorest and most marginalised. There are some very simple steps that can be taken in most countries to make a significant breakthrough, including ending tax incentives, raising corporate taxes on the biggest companies, improving taxation of the extractive industries, supporting fairer property taxes, targeting luxury consumption, preventing aggressive tax avoidance and strengthening revenue authorities.  Increasing tax to GDP ratios by 5% would enable most countries to double their spending on education and health and water and other essential services over the next five years.[iv] This aspiration ought to be a central and explicit target for GPE’s five-year plan. GPE partners in every country ought to be involved in strategic discussions with Ministries of Finance making the case for tax reform as fundamental to expanding sustainable spending on education.

4. ENGAGE ON DEBT

There is a new debt crisis that is squeezing public spending in low income countries and it is getting worse. ActionAid’s new research shows that those countries which spend more than 12% of their budgets on debt servicing are invariably forced to cut their spending on public services.[v] In extreme cases like Ghana, over half of national revenue disappears on debt servicing. In the context of COVID, GPE ought to add its voice to the global call for debt cancellation / suspension (through to at least the end of 2021) which would enable governments to spend revenue already in their treasuries on providing a comprehensive response. GPE should also add its voice to calls for longer term debt renegotiations and re-scheduling where there is evidence that debt servicing is undermining the achievement of education and other sustainable development goals. To prevent an endless cycle of debt crises, this needs to go hand in hand with supporting commitments to reform debt contracting processes so that all future loans are agreed following a transparent and accountable process.[vi]  Given the scale of the present crisis, GPE might support others, such as IFFED, to explore the potential for using a new generation of debt swaps for education.

5. CHALLENGE AUSTERITY AND PUBLIC SECTOR WAGE CONTAINMENT

ActionAid’s new research in all low-income and many middle-income countries shows that the IMF holds down public spending by imposing unnecessarily low inflation targets (in 80% of countries) and deficit targets (in 96% of countries) and by freezing or cutting of public sector wage bills (in 78% of countries) – so most governments cannot employ more teachers, doctors, nurses or care workers.[vii]

IMF advice in respect of inflation is an extreme, even fundamentalist position, challenged by much of the independent evidence and literature. By targeting inflation in low single digits countries are squeezed in their capacity to spend more on priority services. But most worrying of all is the IMF advice on public sector wage bills. Although the IMF sometimes says that it protects or exempts education or health workers, in practice this means freezing at present levels whilst cutting elsewhere. Teachers, doctors, nurses and other healthcare workers make up the largest groups on most wage bills so governments cannot achieve containment targets if they recruit more teachers or pay existing teacher better.

ActionAid successfully challenged the IMF on IMF Wage Bill Caps between 2005-2007 and the IMF agreed to remove them as a condition attached to loans worldwide.[viii] But our latest research shows that they are making a major comeback now, usually in the form of coercive policy advice rather than loans conditions.[ix] In countries with overcrowded classrooms or desperate teacher shortages or ambitious plans to expand secondary education or early childhood education, the containment of public sector wage bills is the biggest obstacle to progress. Teachers are always by far the largest item on any education budget. If you cannot increase spending on teachers, you cannot meaningfully increase the budget. GPE must track national policies on public sector wage bills and make the case for a fundamental re-think that starts with governments determining the number of teachers (and health workers) they need to achieve national development goals, with macroeconomic policies then being aligned to facilitate achievement of those goals.

6. ADDRESS ALL 4 Ss

The 4S framework[x] has been widely picked up, including by African Ministers of Education in 2018.[xi] There is a case for GPE to assume this explicitly and design its engagement on domestic financing around:

• Increasing the share of budgets spent on education (as it already does)
• Increasing the size of government revenue overall (tax, debt, austerity etc)
• Increasing the sensitivity of allocations – driven by a focus on equity
• Increasing the scrutiny of spending in practice

The first two – size and share – are addressed above. In terms of sensitivity of allocations, GPE already has an indicator concerning relatively spending on primary education. This could be broadened to look at equity in spending more broadly, including for  example looking at gender responsive budgeting (despite the focus on gender responsive education sector planning there is very little attention paid to budgeting – where the rubber hits the road). In terms of scrutiny of spending, there is compelling evidence that schools in the most disadvantaged communities are most likely not to receive what they are due (a point highlighted by the World Bank’s WDR 2018[xii]). This can change through supporting independent budget tracking and community social audit groups. When local people, in SMCs and PTAs know what money should arrive and have a viable route to be heard if money does not arrive, the impact can be transformative. This is an area where CSOs can play key role (for example through the new Education Out Loud – EOL programme) but which should also be factored into ESPIGs so that there is truly systemic independent scrutiny.

7. TRANSFORM PROCESSES NATIONALLY

GPE has done a good job of supporting inclusive processes at country level through the LEGs and rightly prioritises putting Ministries of Education in the driving seat. There is much potential to deepen mutual accountability and to harmonise bilateral and multilateral aid behind approved sector plans – and work to improve this sectoral coordination needs to continue. However, to date, almost every aspect of the country level process is internal within the education constituency. It is premised on education stakeholders talking to each other. This has to change – with a serious effort to take the case for education to non-education stakeholders – to Ministries of Finance, national Parliaments, Cabinets and Heads of State. We will not shift the position of education by talking only to each other.

The GPE has the potential to play a powerful role. Around the table in LEGs are partners who have significant relationships with Ministries of Finance. The World Bank, the European Union, many bilateral agencies have people involved in regular discussion about wider macro-economic policy – but either they are not joined up with the people sitting around the education table or when they go to those other spaces they do not bring with them the case for education. This must change. It should be an integral part of mutual accountability that GPE partners become more joined up. At the very least there can be an opening of doors for the education constituency to make their case – and guidance about critical macro developments that might impact (positively or negatively) on the education budget.

GPE should advocate for an established and sustained space for a dialogue between Ministries of Education and Ministries of Finance in every country – for example on a quarterly basis. GPE partners in the LEGs can help to ensure that Ministries of Education are well prepared to make strategic contributions and propositions in the dialogues. Education Sector Investment Cases could be part of the solution in helping to take the case for investment to non-education actors – but there also needs to be a readiness to engage intelligently in wider strategic financing debates, understanding the impact that they have on education financing. This may require GPE investing in capacity development and support for dedicated financing capacity within Ministries of Education – and possibly even education focal people within Ministries of Finance.

There might even be a regular dialogue with relevant Parliamentary Committees responsible for budget reviews and approvals – and an occasional dialogue with national Revenue Authorities. Perhaps most crucially the World Bank or other GPE partners could help to ensure that the financing needs of education are actively discussed with key stakeholders whenever an IMF mission comes to the country (usually every six months). Until education is represented in these strategic spaces – and education actors are prepared to use those spaces well – education will remain a half forgotten after-thought in the most critical discussions that affect the revenue available for education.

8. ENGAGE INTERNATIONALLY – THE IMF and FFD

GPE needs to match more strategic national engagement with international engagement – as the most crucial advocate for increased education financing. GPE ought to be sitting at the highest tables in the key spaces to make the case for education financing. This ought to include having a regular (perhaps quarterly) dialogue with the IMF about how its global policies and practices impact on education. The IMF is showing an increasing appetite for adjusting its policies to support countries to achieve the SDGs but there is no-one inside the IMF who has a specific lens on the financing of SDG4. It is highly likely that GPE would be knocking at an open door if it approached Kristalina Georgieva with a request for a regular dialogue with senior IMF officials.

Likewise, GPE ought to be more active and visible in the Financing for Development (FfD) space. Whilst active at UNGA and HLPF, GPE has not engaged significantly in FfD – and yet this is where critical decisions could and should be taken that would have a dramatic impact on domestic and international financing of the SDGs. For example, there has been a major call made at FfD since the Addis Ababa meeting in 2015 for the creation of a representative UN Tax Body that is resourced and empowered to set global rules – replacing the present role of the OECD.[xiii] It makes no sense for the club of rich nations to get global tax rules and as an agency focused on supporting low and lower-middle income countries, GPE ought to be adding its voice to this call and for other structural solutions that could  help to transform the financing available for education.

9. CONCLUSION

ActionAid and many others have been calling for several years for GPE to have a more serious engagement on domestic financing.[xiv] In the context of COVID-19 and the development of a new strategic plan, this is the key moment to make a breakthrough. This will require investment in some modest capacity in the GPE Secretariat – but most of the transformation that is needed can be achieved by changing guidelines and indicators and drawing on the full capacity of the GPE partnership. It is not necessary for everyone in GPE to become an expert in these issues, but GPE must recognise now that wider financing issues have a fundamental impact on the achievement of its mission and goals. If GPE is not championing the case for education financing in these broader strategic discussions, who will?

About the author: David Archer is Head of Participation and Public Services, ActionAid and Chair of the Strategy and Impact Committee of the Global Partnership for Education. He is the Guest Editor of NORRAG Special Issue 5, in preparation, on tax and education deve

ENDNOTES

[i] https://report.educationcommission.org/report/

[ii] See for example Gaspar, P. et al. Fiscal Policy and Development: Human, Social, and Physical Investment for the SDGs. IMF Staff Discussion Note, January 2019. This view was asserted by two separate senior IMF officials in the IMF annual meetings in October 2019

[iii] See Who Cares for the Future: finance gender-responsive public services!  from page 76

[iv] See Table 10, page 82 Who Cares for the Future: finance gender-responsive public services!

[v] See Table 1, page 37 Who Cares for the Future: finance gender-responsive public services!

[vi]For example Eurodad’s 10 principle for sovereign debt resolution: https://eurodad.org/files/pdf/5d91eb4d523cf.pdf .

[vii] See section 4.5 from page 56 Who Cares for the Future: finance gender-responsive public services!

[viii] See, for example: https://actionaid.org/publications/2007/confronting-contradictions and IMF. Public Information Notice #07/83: IMF Executive Board Discusses Operational Implications of Aid Inflows for IMF Advice and Program Design in Low-Income Countries. 19 July 2007.

[ix] See Table 7, page 66 Who Cares for the Future: finance gender-responsive public services!

[x] See Financing Matters: a toolkit on domestic financing for education

[xi] See Nairobi declaration and call for action on education

[xii] See Learning to Realise Education’s Promise

[xiii] See for example: https://www.taxjustice.net/2016/04/15/three-things-the-heads-of-the-world-bank-and-imf-got-wrong-about-an-intergovernmental-tax-body/

[xiv] See for example this report from 2014: https://actionaid.org/publications/2014/sustainability-global-partnership-education-role-domestic-resource-mobilisation

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