We know that investing in education pays off in the long run—for individuals over their entire lives and for entire societies. But we also know that when it comes to financing education, the devil is in the details: governments need to invest in education adequately, efficiently and equitably to get the most value from what they spend.

The latest Education Finance Watch (EFW) report from the World Bank and UNESCO shows that during the last decade, total education spending by governments, households and donors globally has increased steadily. But this rise has not led to major increases in allocations per child, especially in poorer countries with growing populations. Indeed, globally, total education spending per child has not increased.

If it’s tricky for high-income countries to ensure effective education spending, it’s a colossal challenge for lower-income countries, which face a double bind: investing in education will be a significant, if not decisive, factor in eradicating poverty and building resilience to crises, but these very same problems of poverty, debt burdens and crises prevent these countries from investing at the levels required to change their development trajectories.

The learning and skills crisis only deepens this dilemma, with students not learning foundational skills and not being equipped to meet the needs of the labor market, which puts pressure on education systems to level students up and drains their capacity for broader investment and reform. Additionally, the combination of the COVID-19 pandemic’s lingering financial repercussions and escalating global debt has limited countries’ ability to invest more in education.

The EFW report shines light on the state of education financing, so that countries, donors, partners and communities can take informed action. Since 2021, this collaboration between the World Bank, the Global Education Monitoring (GEM) Report team and the UNESCO Institute for Statistics (UIS) has tracked trends in education spending, examining how much countries invest in education and how these investments align with their development needs, particularly in low- and middle-income countries, which face the most severe challenges. 

The Education Finance Watch 2024 reveals five key findings on the state of education finance:

1. Spending is rising, but it’s still not enough to address the learning crisis, especially in low- income countries: Global education spending has been on an upward trajectory over the past decade, signaling strong commitment from governments. Both low-income countries and lower-middle-income countries have increased annual education spending more rapidly than wealthier ones. However, in many low-income countries, even those that have reached education spending targets recommended for their GDP level, absolute levels of funding remain too low to guarantee adequate student learning. As of 2022, annual expenditure per child in low-income countries amounted to no more than $55 (or Purchasing power parity (PPP)$172) (see figure below).
 

Figure 1: Although total global education spending has been on an upward trajectory over the past decade, annual government expenditure per child in low-income countries is insufficient to ensure adequate student learning

^{a. Growth in real education spending (all sources) by country income group, 2010-2022, with 2010 = 100
b. Government education spending per school-age individual (constant 2022 US dollars) by income group, 2010-2022}

2. But spending more is not enough without attention to efficiency and equity: Although total education expenditure has increased since 2010, education spending per child has largely plateaued, reflecting global demographic shifts. A clear correlation exists between increased financial investment in education per child and improved educational performance, especially in low-income countries. Nonetheless, low-income and lower-middle income countries often struggle to allocate educational funds efficiently, which can undermine the impact of their spending. To improve educational outcomes, governments must spend more efficiently in ways that differ depending on context. But the building blocks are the same everywhere: enhancing public financial management to allocate resources to the most cost-effective programs; promptly addressing local needs; and improving school management to optimize teacher performance and the best possible use of available resources. For instance, evidence from Brazil, Colombia, Indonesia and Uganda shows ways to boost student achievement through budget-neutral policies, such as granting more spending autonomy to subnational governments and reducing teacher absenteeism. 

3. While the absolute amount of education aid is high, its proportion of total development aid has declined: Globally, total education aid reached a record high of $16.6 billion in 2022, up from $14.3 billion in 2021, a real-term annual growth of 16 percent. Nevertheless, the share of total development aid allocated to education fell from 9.3 percent in 2019 to 7.6 percent in 2022, reflecting donors’ shift in funding priorities to energy, support for Ukraine, and health care in response to the COVID-19 pandemic. By 2022, official development assistance accounted for 12.2 percent of education funding in low-income countries (versus 13 percent in 2021) and just 0.29 percent of total education funding globally.

4. Debt is putting a strain on education: In the past 10 years, in developing countries, interest payments on public debt have increased faster than government education spending. Some low and lower middle-income countries allocate nearly the same per capita resources to debt servicing as they do to education. Innovative financing mechanisms for short-term relief, such as debt restructuring, debt swaps, and debt-for-development agreements must be complemented by sustained domestic resource mobilization, efficient spending, effective public financial management, and robust economic growth to ensure that their populations can receive quality education.

5. We need more and better data reporting: While about 7 in 10 countries publish key education financing data, the absence of disaggregated data by expenditure type or education level makes it difficult to monitor education financing effectively. While we were able to access more household-level data for the 2024 EFW than in previous years (five times more data points), there is still a dearth of available post-pandemic data, especially from poorer countries where households spend much more out of pocket on education in relative terms. Without the data needed to understand the problem in all its complexity, policymakers are stymied in coming up with effective solutions.

We encourage countries, partners, donors and communities to use these findings as a starting point for action and to continuously improve their data collection, reporting and analysis practices. Every education stakeholder, including our own organizations, can and should prioritize education finance and allocate resources where they will have the greatest impact. This way with better, more accurately informed investments in education, we can improve learning outcomes for all. 

Source:https://blogs.worldbank.org/en/education