The IMF’s Role in Education Finance amid Declining Aid
Financing is key in educational policy. Fiscal choices decide which goals get support amid limited public resources. However, appropriation decisions are rarely just technical. They involve trade-offs that show changing political alliances and economic limits.
After the Second World War, aid for schooling grew quickly. Official development assistance (ODA) from high-income donors to low- and middle-income countries increased in the 1980s and during the “Education for All” decade in the 2000s. In countries like Afghanistan, aid is crucial. Grants cover about three-quarters of public spending, including education. External support is vital for their education budgets.
The tide is now receding. UNESCO’s monitoring of Sustainable Development Goal 4 indicates that global Official Development Assistance (ODA) for education decreased from 9.3 percent in 2019 to 7.6 percent in 2022. Total education aid fell from US $19.3 billion in 2020 to US $17.8 billion in 2021, with Sub-Saharan Africa experiencing a 20 percent contraction. Diminishing donor funds and a shift in priorities have tightened financial resources. Low-income countries are grappling with post-pandemic learning loss and demographic pressures, while the significant reduction in international aid for education is further complicating access to education.
The finance gap has brought macroeconomic institutions into a space once led by development banks and UN agencies. The International Monetary Fund's 2025 Technical Note and Manual on education spending calls schooling outlays “macro-critical.” This is because human-capital growth affects overall growth, inequality, and debt dynamics. The Note organizes assessment around three key criteria: adequacy, efficiency, and fiscal sustainability. This gives staff a clear framework for surveillance and program design.
Adequacy looks at whether current spending matches national goals and peer standards. The IMF uses SDG costing models to estimate that low-income countries need to boost annual education spending by about 4.9 percentage points of GDP by 2030. This gap likely cannot be closed by domestic revenue alone.
Efficiency examines how well inputs turn into learning outcomes. The Note points out issues like misallocation, weak teacher management, and procurement waste. These problems can lower learning by a full year of schooling—gains that could be achieved without extra funding.
Fiscal sustainability checks if education spending can be supported without risking debt issues or harming other priorities. The guidance suggests setting sectoral targets within medium-term fiscal plans and sequencing reforms. This way, budget cuts won’t erase enrollment improvements.
Recognizing a lack of in-house expertise, the IMF urges collaboration with the World Bank, UNESCO, UNICEF, and the Global Partnership for Education. They caution that program conditions must meet standards of “parsimony and criticality.”
The Fund’s framework adds a clear macro-fiscal view to education finance discussions. However, adequacy, efficiency, and sustainability are necessary but not enough for fair learning. Without a focus on rights-based norms that prioritize inclusion and governance reforms to enhance local input, the quest for fiscal balance may reinforce the inequalities that development finance aims to resolve
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