Beyond business as usual: aid to education for sustainable development

• In Event: Highlighted Session: Reshaping educational financing for development: responsible and responsive aid

Proposal

Paper 1 Beyond Business as Usual: Aid to Education for Sustainable Development

Conventional approaches to aid to education have failed to anticipate and resolve long standing problems of access, exclusion, and learning. Sub-Saharan Africa would need to spend about $120 billion every year to achieve SDG4 by 2030. This is about $40 billion a year more than governments currently spend. If the shortfall were to be covered with gap filling aid it would represent ten times the current level and induce chronic absorption problems. Parts of South Asia face similar dilemmas. Since the beginning of 2020 the outlook for increased aid has worsened. Covid-19 will almost certainly reduce the volume and the value of aid. Socially responsible approaches to aid will focus on limiting the damage of austerity and on more sustainable approaches to aid to education.

Financing shortfalls in recurrent expenditure through grants is unreliable and lacks resilience in recession. Large scale lending increases debt which has to be repaid and can lead to large fees and interest payments. Sub-prime borrowing is risky. More than a quarter of SSA countries are at high risk of debt distress and half receive more than 5% of GDP in aid. The median rate of domestic revenue collection is 15% of GDP so this can account for a third of government expenditure. It leads to budgetary dependence. Countries in SSA collect less than 10% of all tax in income tax from fewer than 5% of adults. In a case study in East Africa only 5% of company Directors, and few of the wealthiest officials, paid any tax at all. Over $500 billion appears to be held in untaxed assets outside Africa.

Sustainable development needs financing from fair taxation. The poorest countries will continue to need grants but these should be conditional on reducing dependence. More domestic revenue coupled with the effects of economic growth are the best long term option. These would dwarf any plausible increases in aid and would close gaps year after year.

New approaches will highlight the proposition that aid for fiscal reform is aid to education. This, needs accompanying with a sharp focus on catalytic inputs that increase efficiency and effectiveness that endures and makes mass public education systems more affordable. This is also likely to be the only route to endogenously driven economic recovery. The development of fiscal states that have a social contract with their citizens to collect revenues to finance public services free of dependence on external financing is essential. Otherwise the “infinite do loop” of gap filling aid beckons.

Author

• Keith Malcolm Lewin, University of Sussex