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Paying for Education: How the World Bank and the International Monetary Fund Influence Education in Developing Countries
Nancy C. Alexander
Citizens’ Network on Essential Services, A Project of the TIDES Center
The 1980s are sometimes described as a lost development decade. School enrollments slumped. The tremendous progress made toward universal primary education in the 20 years from 1960 to 1980 was arrested or reversed in many countries. In 1990, the Education for All (EFA) Conference in Jomtien, Thailand, made an urgent appeal to governments, donors, and creditors to address the decline in basic education. Donor governments and creditors, including the World Bank, made commitments to help developing countries achieve education for all. In June 1996, a conference was convened in Amman, Jordan, to assess progress since the EFA Conference in Jomtien. The United Nations
This document was written for Oxfam America. Portions of it may be found in other publications by Nancy C. Alexander, including: “Accountability to Whom: The World Bank and Its Strategic Allies,” published in Derde Wereld in May 1998; various issues of “News & Notices for World Bank Watchers”; “NGOs in the International Monetary and Financial System,” (with Charles Abugre) in International Monetary and Financial Issues for the 1990s, published by UNCTAD; and “Financing for Development,” published by Friedrich Ebert Stiftung. Requests for reprints should be sent to Nancy C. Alexander, Director of the Citizens’ Network on Essential Services, A Project of the TIDES Center, 7000B Carroll Avenue, Takoma Park, MD 20912.
N. C. Alexander International Children’s Emergency Fund (UNICEF, 1998) cites the findings of the conference report: Overall, primary enrolment was the brightest sign of progress by mid-decade, with some 50 million more children in developing countries enrolled in primary school than in 1990. Discouragingly, however, this figure only managed to keep pace with the numbers of children entering the 6- to 11-year old age group over the period. (p. 15) Unsatisfactory progress was noted in some regions—South Asia and subSaharan Africa. Progress in educating girls had also been disappointing. During the five years following the conference, little gain was recorded in the developing world in girls’ primary enrollment as it rose only by a fraction of a decimal point, from 45.4% in 1990 to 45.8% in 1995. The gender gap in adult literacy actually widened over the same period. (UNICEF, 1998, p. 15) At the World Education Forum in April 2000, the international community promised to launch a “global initiative” to mobilize resources to support national education efforts. However, since the Dakar, Senegal, Forum, there has been no headway toward launching the initiative. Educational progress is uphill. The world economic slump has hit developing countries hard. Many are in recession or depression. Meanwhile, the donor and creditor community is increasingly tight-fisted. However, as discussed later, more money for education is not necessarily the answer. Even with vigorous education campaigns, there will be disappointing progress unless creditors—especially the International Monetary Fund (IMF) and the World Bank—begin to support homegrown, national development strategies and education action plans. In addition, the institutions need to change their policy prescriptions for ailing economies, in general, and for the education sector in particular. This article provides an overview of the roles of the IMF and World Bank from 1980 to the present. It distinguishes between two types of impacts exerted by the IMF and World Bank in the education sector of borrowing countries: (a) the World Bank’s direct involvement in the education sector of developing countries and countrywide economic reforms and (b) Structural Adjustment Programs (SAPs) financed by the IMF as well as the World Bank. The first two sections of this article address the World Bank’s direct involvement in education through project investments (e.g., school construction, curriculum development, or textbook publication) and reform of the education sector (e.g., school privatization, cost recovery, decentralization). The third section addresses SAPs financed by the IMF and World 286
Paying for Education Bank. Unlike the World Bank, the IMF does not make project investments or reform education policies; it only engages in structural (and sectoral) adjustment lending. The impacts of IMF- and World Bank–financed adjustment programs ripple throughout a society, including households and school systems. Few independent analysts have attempted to evaluate the impact of adjustment on education. This is unfortunate because adjustment policies are a more powerful influence on the education sector than education projects. As a result of the hiatus in research, we are significantly dependent on the World Bank and IMF for their own evaluations of the impact of adjustment on education. This article finds that the operations of the institutions have had both positive and negative impacts. The net influence of each institution has been different in different countries, among different groups within countries, and in different time frames. Much of the literature about the impact of the institutions addresses their track records in the 1980s, when even according to their own admission, the institutions paid scant attention to the impacts of their economic reform loans on vulnerable people. This article underscores the World Bank’s conclusion that, in many countries, adjustment lending had a negative impact on primary education in the 1980s. During the 1990s, there appears to be a weak, but positive, response to measures taken by the institutions and borrowing countries to modify SAPs. That is, in some circumstances, safety nets and education investments have helped to stem school enrollment declines or increase enrollments. In 2002, the World Bank Group launched a Private Sector Development (PSD) strategy that aims to expand the provision of educational services by private firms and nongovernmental organizations (NGOs). In selected instances, this approach may have merit. In general, however, the PSD strategy endangers educational progress because it ignores the lessons of experience. Among other things, it ignores the fact that when educational services are provided at cost, they will not reach poor populations even when subsidy schemes are used. To analyze the influence on education of the IMF and World Bank operations, this article reviews the following issues: • IMF and World Bank loans. Historically, the IMF and World Bank provide loans1 at market rates as well as credits at concessional
1 Technically, governments with active IMF programs are not “borrowers,” although the term is used in this article. They are actually “purchasers” of resources, some of which they contribute to the IMF.
N. C. Alexander rates (with interest rates below 1%). Shortly, the World Bank will increase its levels of grant assistance. The volume of resources for education. Too often, the public sees increasing amounts of resources for education as a good thing. However, history shows that “aid” has sometimes been used to dismantle education systems. Greater quantities of aid should be used only to support good education policies. The types of loans: projects investments or adjustment loans. Over time, adjustment loans generally have a stronger influence on educational outcomes than do investments in education projects. The purposes of reform. The purpose of many adjustment programs (e.g., cutting deficits and lowering per pupil costs) can complement or conflict with educational goals. The impacts of reform. In many countries, the formulae used by the Bank to reform the education sector have had more negative than positive impacts. Furthermore, SAPs have often sabotaged educational progress while weakening the state. Ultimately, the state needs to be the guarantor of educational access, quality, and progress. IMF and World Bank Instruments: Grants and Loans As a rule, bilateral donor governments and United Nations agencies provide grant aid, whereas the World Bank and IMF provide loans and credits. Hard currency debt obligations to the institutions must be repaid. Grants are usually more valuable to countries than foreign loans; “soft,” or concessional, credits are more valuable than “hard,” or market rate, loans. Concessional loans have a significant grant component; they have low interest rates and long grace periods. The World Bank has facilities that offer both types of loans. The International Bank for Reconstruction and Development (IBRD) extends socalled “hard” or market rate loans. The International Development Association (IDA) extends concessional credits to poorer governments. IBRD and IDA together constitute the World Bank. The United States is exerting tremendous pressure on the IDA to provide an increasing amount of grant financing, especially for education. Ordinarily, this would be good news. However, the United States wants the World Bank to privatize education and use the grants to offset the costs of providing education to poor populations. Experience demonstrates that efforts to offset educational services through subsidy schemes seldom work. 288
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Paying for Education The Volume of Resources for Education Grant assistance has declined over the last decade. In 1994–95, bilateral donor governments provided less support for education (both in absolute terms and as a percentage of total aid) than they did in 1989–1990 before the 1990 EFA Conference in Jomtien. The good news is that the volume and percentage of education aid devoted to basic education has tripled.2 World Bank lending for education has increased significantly since the Jomtien conference. Overall lending for education doubled from the 1986 to 1990 period to the 1991 to 1998 period. Lending for primary education has increased by 360%. In 1995, the volume of Bank loans ($3.1 billion) represented 28% of all external finance for education. Of the approximately $15 billion in education loan commitments made by the World Bank from 1991 to 1998, two thirds were at market rates. One third ($5.7 billion) was for poorer countries, which borrow from the IDA and are concentrated in Africa. From the mid-1980s to the mid-1990s, the share of education lending rose for two regions—South Asia and Latin America and the Caribbean; the share of education lending fell for four regions—sub-Saharan Africa, Middle East and North Africa, East Asia and the Pacific, and Europe and Central Asia. The volume of World Bank assistance to the education sector understates the institution’s influence, because high levels of assistance provided by bilateral donors usually help finance World Bank–financed projects and policies. Bank assistance (indeed, all external finance) represents a tiny proportion (0.5% of 1%) of global spending for education. However, in some times and places, it is significant in terms of volume of resources for, and influence on, education. For instance, during the 1980s, Bank resources constituted 16% of the resources available to African governments for education. The Types of Loans Project lending is very different from adjustment lending. World Bank–financed projects take 5 to 7 years for implementation. In contrast, adjustment loans are quick disbursing. Adjustment loans—SAPs and sector adjustment loans (SECALs)— influence both the demand for and supply of educational services. Demand
Germany, Japan, the United Kingdom, France, and The Netherlands shifted considerable aid into basic education. Australia, Austria, Canada, Denmark, Finland, Switzerland, and the United States made modest shifts. Belgium, Italy, and Norway decreased allocations to basic education.
that is. Such changes affect many aspects of school systems. SAPs often change the level or composition of education spending.g.” which are imposed at negotiation. Alexander for educational services is elastic.000 policy conditions attached to World Bank SAPs. which puts pressure on social sector spending. The important binding conditions on SAPs (e. the goals of SAPs often conflict with the goals for education. 1979). 3 290 .” or formulaic approaches to the education sector (World Bank. Generally. or tranches) may have an adverse impact on the social sectors. there were more than 3. SAPs attempt to reduce the budget deficits of borrowing governments.N. families place a higher value on education of boys than girls. Often. have often retarded educational progress. Of these 50. Figures derived from a list provided to the author by the Poverty Reduction & Economic Management Network of the World Bank. preappraisal. However. “up-front conditions. Families make choices and set priorities. The Purposes of Reform In addition to influencing the incomes of households and the cost of education. administration and maintenance. and educational materials. These “recipes. Hence. these binding conditions usually induce governments to cut budget deficits. such as school construction. Adjustment loans for the education sector may attempt to privatize and decentralize education while recovering costs through user fees. C. Because education budgets usually constitute a significant portion of the federal budget. an understanding of the net impact of the IMF and World Bank on education relies heavily on an understanding of the impact of adjustment loans. adjustment loans for the education sector or for an entire economy are more powerful and influential than project loans. social conditions are often discretionary. but only 50 related to education. From 1980 to 1993. In addition. and prior to release of loan installments. only 6 explicitly called for increased spending on education. demand rises or falls as direct and indirect costs of education rise or fall relative to a family’s income level.3 Now social conditionality (requirements in a loan agreement in addition to the terms of repayment) is the rule rather than the exception. They also reorient spending from secondary and higher education to basic education.. Among other things. teacher salaries and benefits.
the World Bank is considering extending grant assistance to subsidize privatization of education in borrowing countries. However. This percentage has increased. Affiliate members of the World Bank Group include the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency. the World Bank’s education commitments represented 46% of bilateral assistance and 28% of all assistance in 1995 (Table 1). Forms of Assistance: Grants and Loans Bilateral donor governments and United Nations agencies give grants to developing country governments. However. Grant resources may seem more valuable to developing country governments than loans. In the early 1990s (1991–1994). the volume of assistance provided by a financier is used as a proxy for effectiveness.” or concessional.9 billion) represented 40% of all bilateral grants ($19. bilateral donor governments provided less support for education (both in absolute terms and as a percentage of total aid) than they did in 1989 and 1990 before the 1990 EFA Conference in Jomtien. loans to the poorest countries.Paying for Education The World Bank Group’s4 Approach to the Education Sector Volume of Assistance for Education One can gauge the influence of a donor or creditor on the education sector of a developing country by reviewing the volume of assistance and its type. purpose.8 billion). This is misleading. the percentage of education grants devoted to basic education tripled during this period. and impact. which are concentrated in sub-Saharan Africa and South Asia. because grants do not need to be repaid. IDA provides “soft. 4 291 . The IBRD is the facility for countries with per capita annual incomes exceeding $925. the IBRD. the IDA. as well as the concessional window. Too often. According to UNESCO’s (1998) World Education Report. the volume of Bank loans for education ($7. Declining Grant Aid for the Education Sector In 1994 and 1995. IDA is the facility for poorer countries. The World Bank refers to the institution’s market rate window.
N.445 28% Note. Levels and Types of Bank Lending Overall lending for education doubled from the 1986 to 1990 period to the 1991 to 1998 period. Paris: United Nations Educational.057) $278 ($100) $7. 292 . From World Education Report (p. The $3. UN = United Nations. 112). 1998). Reprinted with permission. Basic Education Emphasis Bank lending for primary education increased by 360% from the 1986 to 1990 period to the 1991 to 1998 period. During the nine FYs 1990 to 1998. sector aid. which is 9. education loan disbursements totaled nearly $1. Scientific and Cultural Organization. Importantly. Usually.1% of total World Bank loan commitments of $28. lending levels for basic education have fluctuated wildly. Dollars Expenditure Bilateral assistance All multilateral resources World Bank UN programs UNESCO Total World Bank as % of total Amount $4. Commitments are disbursed over a period of years.S. technical cooperation.9 billion. In fiscal year (FY) 1998. Copyright 1998 by UNESCO.1 billion level represents 36 loans to 28 countries. Alexander Table 1 1995 External Expenditures for Education in Millions of Current U.450 $2. it is calculated that 60% to 80% of all education aid commitments are spent in donor countries (Bennell & Furlong. During the 1990s. the level of education loan commitments—$3. In FY 1998. 70% to 75% of all donor support since the mid-1980s has focused on technical cooperation. Scientific and Cultural Organization. most technical cooperation monies and some project monies are spent in donor countries for purposes such as training. Technical Assistance That Never Reaches Developing Countries The Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD) categorizes aid as follows: investment projects.594 billion. UNESCO = United Nations Educational.717 ($2. and other. 1998. the average annual level of lending for basic education was $809 million. C. Thus.1 billion—was three times the FY 1997 level.
when the Bank began education lending. In FY 1996. and health. or SAPs. China. Pakistan. education. such as agriculture.5 The CAS describes plans for both kinds of lending operations: economic reforms. and project investments in different sectors. the Country Assistance Strategy (CAS). India. Twenty percent of the subject CASs proposed education loans. nearly two thirds were extended by the hard loan window. IBRD and IDA Lending for Education International Bank for Reconstruction and Development. whereas education research represents 7% of all research proposed by the CASs. the Bank updates the CAS by preparing a new “short CAS” or a CAS “progress report. Argentina. it was decided that net profits should be channeled to low-income. and the Philippines. Brazil. adult literacy is not a Bank priority. only two projects (in Ghana and in Indonesia) focused on this goal. However. the IBRD. Education loans represented 9% of all loans proposed by the CASs. Although basic education encompasses adult literacy as well as primary education. Korea.” 293 .Paying for Education which is four times the annual average for the years 1986 to 1989. Indonesia. IDA countries. Of the approximately $15 billion in education commitments made by the World Bank from 1991 to 1998. basic education constituted about one third to one half of Bank education lending. In 1962. A CAS is prepared every few years for each borrowing country. The biggest borrowers for education are IBRD or blend (both IBRD and IDA) countries: Mexico. lays out the framework and rationale for Bank investments in a country. The World Bank’s CASs identified education as a priority in 77% of all CASs prepared during FY 1997 and the first half of FY 1998. 5 If country conditions change in the interim. During the 1990s. power. an additional 20% proposed education research. The Board considered a proposal to use IBRD net profits for education grants in IBRD countries. Prominence of Education Operations in the Bank’s Loan Portfolio The World Bank’s medium-term plan for a borrowing country. there was controversy about whether it was appropriate to use Bank finance (rather than grants) for education purposes.
2 billion in FY 2001 to about $1. In FY 1998. the IFC would also take charge of the World Bank Group’s on-lending operations and policy risk guarantees.6 The power and authority of the World Bank’s private-sector affiliate. Why? First. are partly to blame for the inability of governments to efficiently process and administer education loans.4 billion for 126 projects in FY 2000. 11 of 35 new education loan commitments were to IDA countries. The World Bank has an online service. which guides investors to profitable ventures in the education sector. The Bank increased its budget in FY 2002 to help finance expanded lending to low-income borrowers.3 billion in FY 2002. if the market does not provide these services to borrowing countries. such as political turmoil and weak institutions. is expanding. such as the U.8) The IFC will increasingly team up with the Bank’s soft loan arm. C.) The World Bank’s financing of education fell from an average of $2 billion per year in the 1990s to $1 billion per year for the last 2 years. the IFC and IDA are aggressively promoting the privatization of education. the IDA. Implementation problems also stem from other factors.” 8 For the most part. Some Bank critics claim that SAPs. government. Most IDA countries are in Africa in which the ratio of enrollments to the primary school-age population is declining. Alexander International Development Association. and take equity positions in.7 (The IFC has a mandate to lend to. During this time frame.9 which is expected to reach $7 billion in FYs 2002 to 2004. 10 IDA commitments increased to $6. the Bank is under pressure to “move money” for education. 7 6 294 . compared with $4. (Seven of the 11 were in sub-Saharan Africa. International Finance Corporation. private ventures. Hence. over one third ($5. which have downsized governments. That is. education is increasingly a priority of powerful shareholder governments.8 billion for 134 projects in FY 2001. the IFC/MIGA will provide them (or refer the borrower to the IBRD and IDA).N. which lends to low-income governments.7 billion) of the $15 billion in commitments represent credits extended by the IDA.10 Together. It succeeds the Bank’s FY 1998 to FY 2000 Strategic Compact. 9 One internal paper distributed within the Bank in March 2001 envisioned the Bank’s administrative budget growing from $1.S. The IFC’s approach to the education sector is described in Karmokolias and Maas (1997). EdInvest. Second. The World Bank’s (1995c) 1995 Annual Report referred to the institution’s shift to supporting private-sector investment (as opposed to direct lending to governments) as “a dramatic departure from what had been Bank policy for half a century. there are bottlenecks in the lending pipeline because many governments cannot or will not provide the local cost financing components of education operations. the IFC. These levels continue to gyrate.
by 2000. 1992). Indeed. recurrent costs (e.g. Latin America and Caribbean and East Asia and the Pacific received the most education resources—about 65%. small and medium-sized enterprises. Governments prefer to borrow for capital expenditures (e.11 and IDA will work with governments to design subsidy and other schemes to offset the costs of private provision to lowincome consumers. domestic financial institutions. Governments prefer grant financing to loan financing of education. the Poverty Reduction Strategy Paper [PRSP] process. the IMF and World Bank are suspending debt relief for several countries due to their inadequate progress in privatization. • Education operations. the IFC will increasingly take the lead in expanding private provision of services. IFC: Strategic Directions (World Bank.. Historically. construction of facilities). Of the six geographical regions. The IFC’s infrastructure department was created in 1992 and. Borrowers provide almost 20% of the total cost of education operations in counterpart funds.g. and Europe and Central Asia. infrastructure. and information technology and communications. Middle East and North Africa. 2001). From the mid-1980s to the mid-1990s. the share of education lending rose for two regions—South Asia and Latin America and the Caribbean. including the social sectors.g. Such coercive tactics subvert efforts by citizens in borrowing countries to shape their own future through national planning processes (e. demand for education loans has been sluggish due to factors such as: • The high level of sustained. World Bank. Especially in these areas.. The poorer governments have greater difficulty providing counterpart funds.Paying for Education The IFC’s paper.. 295 . teacher salaries and educational materials) required for effective education operations. 11 IFC investments increased four and a half times over in real terms between 1980 and 2000. one fifth of IFC lending went to private-sector infrastructure. require that borrowers provide counterpart funds. Initiatives to privatize education are being taken without regard for the needs and preferences of citizens in borrowing countries. the share of education lending fell for four regions— sub-Saharan Africa. like other operations. Demand for education loans. targets five frontier areas for business expansion. East Asia and the Pacific. Regional patterns.
staffs each Country Management Unit. aid and credit are sometimes diverted for other-than-intended purposes. The Human Development (HD) Network supplies advice and services with respect to education. it is fungible or transferable for any purpose. although lending for education has been expanding since the late 1980s.000 staff members are organized into thematic networks that provide services to country and regional departments. Education operations do not usually generate a stream of revenues in the near term. As described later. The Country Management Units generate demand for the advice and services of the Bank’s thematic networks. The World Bank’s 10.N. Alexander • Returns on education are realized in the long term. these individuals coordinate the design of CASs and determine the level and composition of lending. along with a chief economist. demand by the poorest countries is much lower than demand by lower middle-income and middle-income countries. Thus. Of this total. governments may divert assistance to avoid violating IMF budget deficit targets. including education lending. The staff of the country and regional departments within the Bank hold the reins of power in the Bank. Education assistance is especially fungible because governments are averse to providing sustained levels of local cost financing for purposes such as teacher salaries and educational materials. 296 . where there are IMF programs. which they believe their government should underwrite with their tax dollars. Fungibility (the ability to freely move money from one category of expenditure to another). A powerful country director. about 20% have graduate exposure in the field of education. In addition. Once assistance reaches a government’s treasury. Nor do they directly contribute to the generation of foreign exchange revenues. Many NGOs in developing countries oppose the government practice of borrowing at market rates for social services. Some NGOs also oppose greater World Bank provision of grants for education where grants would subsidize the privatization of education. C. Staffing The Bank has approximately 240 staff working in the education sector. which can help to service foreign debts and import goods and services. health. In conjunction with their client country or countries.
it is unfortunate that researchers that seek to understand the influence of the World Bank on the education sector tend to focus on education projects and overlook adjustment programs. The HD Network is relatively powerless compared with the thematic networks that focus on macroeconomic reform. project loans disburse slowly over the course of 6 or more years. IMF loans to poor countries are called Poverty Reduction and Growth Facility Arrangements. In contrast. Hence. and infrastructure. the IMF and World Bank are gradually expunging the term adjustment from their lexicon. which aim to liberalize and privatize economies in the context of strict budget discipline. many World Bank adjustment loans to low-income countries are now called Poverty Reduction Support Credits (PRSCs). Hence. The IFC also takes equity positions in ventures. adjustment programs have a greater impact on the education sector than do project investments. they are not accompanied by any change in the institutions’ policy prescriptions. As a rule. Lending and Nonlending Education Services Lending Services The principal loan instruments of the World Bank are (structural and sectoral) adjustment loans and project investments. the Bank and the IFC offer a variety of partial risk and partial credit guarantees to private investors.12 Adjustment loans are popular with the World Bank and its borrowers because they are fast disbursing and inexpensive to process. At present. Structural Adjustment Programs Adjustment loans. 12 In addition. Thus. the public tends to have a distorted view of the role of the World Bank and the IMF in education. 297 . private-sector engagement.Paying for Education and social protection operations to the country and regional departments. are controversial and unpopular for reasons described in the next sections. These name games are cosmetic. Education sector adjustment policies and structural adjustment programs are discussed in the next sections. World Bank adjustment loans to middle-income countries are being called Development Support Loans.
However. Project Investments In the early days of Bank project lending. and educational materials. Most education expenditures are recurrent expenditures. Supplyside financing works on the “field of dreams” theory that “if you build the school. The volume of construction has declined steadily and now stands at about 23% of lending. Hybrid loan instruments. a lover of baseball believed that if he built the perfect ballpark. The APL is a loan with a long-term development purpose and a phased-in implementation process. such as teacher salaries and benefits. combine adjustment and project elements. technology. baseball players would rise from the dead to play. C. Hybrid Loans Adjustment provisions are also being packaged with project investment loans. These new instruments are especially well suited to education operations. Alexander Sector Adjustment Loans Adjustment loans for the education sector often attempt to privatize and decentralize education while recouping costs through various means. 13 In the 1989 movie Field of Dreams. families must be able to afford the direct and indirect costs of educating their children. including adaptable program loans (APLs) and learning and innovation loans (LILs). Like the APL. textbooks. 298 . and other educational materials. until the late 1980s. Bank-financed projects focus on the supply side of education—that is. a Bank policy prohibited loans to support recurrent expenditures. which allows the borrower to pilot and then scale up and replicate projects. which involve a variety of governmental and nongovernmental stakeholders. provision of buildings. including user fees. nearly 80% of projects involved civil works construction. When this policy changed. about 60% of operations supplied equipment and textbooks or provided technical assistance. the composition of Bank lending changed.”13 Providing a place in school for every child is a demand-side as well as a supply-side challenge. In 1995 to 1997. However.N. they (the students) will come. the LIL allows a “growas-you-go” approach to lending. it is smaller in scale.
and school and teacher effectiveness. a multidonor collaboration with African countries led by African Women Educators (World Bank. which is part of the Partnership for Strategic Resource Planning. AMP. income foregone from children forsaking employment for school. EDI. the location of schools in deprived rural settings. cultural and religious biases with respect to the value and type of appropriate education.7 years. the opportunity cost of education—that is. improved governance. 1996). technology and networks to address problems 14 The average 6-year-old girl from a low.” EDI also has a Girls Education Program. and 20 multilateral development organizations funded activities of the Economic Development Institute (EDI). Barriers come in many varieties: language barriers. gender discrimination. EDI’s program on education reform is intended to “build capacity and consensus for education reform in developing countries. Cisco Systems.14 high direct and indirect costs. trade-offs between investing in the education of different children within a family. In 1997. Technology and Networks for Education. 21 bilateral donors.3 years of schooling (Patrinos & Ariasingam. Microsoft. p.or middle-income country can expect to attend school for 7. six private foundations. and 3com. URLabs. education financing. Security Storage. an electronic network for teachers and students on development issues. the average 6-year-old boy can expect 9. Health and Population. one of which focused on education reforms. Advanced Network Services. 32). 1998a. Apple. which “helps countries use distance education. Nonlending Services Training In the late 1990s. 11 companies gave substantial support for EDI’s World Links for Development.Paying for Education Projects are only beginning to address issues relating to instructional quality and “demand-side” barriers to education faced by certain populations. Intel. During 1998 and 1999. 299 .15 This program reached 105 schools in 11 developing countries in FY 1998. had 21 core courses. focusing on three areas. 15 Sun Microsystems. Lucent Technologies. which is the Bank’s training and education arm. EDI also has a program in Distance Education. and so on.
The Bank’s Education Knowledge Management System is designed to provide clients. and postbasic education and training. In FY 1998. 70) will study the implementation of girls’ education projects and initiative. the Rockefeller Foundation. and staff of the Bank with the latest information in the following areas: access and equity in basic education. education and technology. a $1. effective schools and teachers.N. education system reform and management. economics of education. p. however. C. Grant Giving In late 2000. early childhood development.2 million grant supported small-scale innovative programs at the community and local levels to increase girls’ enrollment rates. which endorsed the first year of a multiyear program to support UNICEF’s education programs.’s Department for International Development.K. partners. A partnership between the U. Alexander of access and quality in their health and education sectors” (World Bank. Research Recent or forthcoming research reports include: • Impact Evaluation of Education Projects: Decentralization and Privatization Issues • Improving Primary Education in Kenya: A Randomized Evaluation of Different Policy Options • Child Labor and Schooling in Latin America • When Learning Makes Reform More Productive: An Agenda for Analysis • El Salvador’s School-Based Management Reforms • Improving the Quality of Preschool Education in Kenya • Evaluating the Impact of Supplementary Teachers in Nonformal Education Centers • The Impact of Colombia’s Voucher Program: Using Randomization Through a Lottery for Program Evaluation • Economic Analysis in Education Projects 300 . IDA began to provide a large volume of grants for education in recipient countries. p. 32). 1998a. IDA grant giving has been limited to countries in conflict or projects funded by the Bank’s Development Grants Facility. and UNICEF (1998. To date.
midterm reviews were conducted for only 12% of the World Bank’s education loans.g. Intermediate indicators reflect progress toward desired outcomes. Outcome indicators monitor progress toward growth and poverty reduction goals. Hence. Quality of Adjustment Lending The Bank’s OED provides misleading assessments of the performance of adjustment programs. Borrowers sometimes resist using project resources to collect data required for M&E. The Bank’s monitoring and evaluation (M&E) system has been plagued with difficulties. 1997b) 1997 Annual Report. the Bank’s (World Bank.. Since 1992. M&E was seldom performed by client country constituencies. In 1992. about half of its SECALS and 43% of its structural adjustment loans were expected to sustain benefits. the Bank was focusing on measuring results-based indicators and seriously neglecting medium-term indicators. schools built rather than children educated). Historically. For Africa. By 2002. The study also found that tracking project indicators did not measurably contribute to project outcomes.) At the same time. the Bank’s Portfolio Management Task Force was disparaging of Bank M&E. OED finds that just 76% of adjustment loans during these FYs were likely to sustain benefits over time. Moreover. Policy indicators reflect whether the government has complied with policy conditions. There are three types of adjustment performance indicators: policy. A 1994 Operations Evaluation Department (OED) study found that Bank managers did not satisfactorily supervise projects or report on their outcomes at completion. M&E has measured Bank inputs rather than outputs. 301 . intermediate. the Bank and its borrowers are learning more about outcomes without understanding what caused them. and outcome indicators. until the 1990s. (SECALs constitute roughly one third of all adjustment lending by volume. or results (e. which have the most intimate knowledge of the accomplishments of an operation. As noted earlier. The OED relies heavily on policy indicators in claiming that 86% of FY 1999 and 2000 structural adjustment loans and 90% of SECALs performed satisfactorily. the Bank has concentrated on building results-based methodologies of M&E. which concentrated on issues of development effectiveness.Paying for Education Monitoring and Evaluation As of FY 1995. states that the Bank’s current systems for evaluating the education sector are inadequate.
Sustainability. sustainability. the less chance of project success.) 302 . such as manpower development. we see that sustainability is exceptionally low in African countries (56%) and Latin American and Caribbean countries (50%). 22% of these loans made provisions for monitoring poverty and social indicators. the assumption is that poverty alleviation is to be achieved through improvements in macroeconomic stability and in improvements in public administration. (Environmentally and Socially Sustainable Development Network. Alexander A closer look at adjustment programs gives a gloomier view of their performance. skills training. efficiency. targeting. For instance. The OED found that for a cohort of projects completed in the 1973 to 1993 time frame. An evaluation of 111 education projects supported by the Bank since 1989. 62% were judged as likely to sustain their gains. or ways to mitigate negative effects of reform.N. (The longer the Bank is involved in the education sector. etc. the Bank found that only 45% of FYs 1998 to 2000 adjustment operations addressed poverty issues adequately. over 82% achieved their stated objectives. and institutional development.. Even where traditional subsidy and budgeting procedures are to be dismantled. Another evaluation of adjustment loans found that: The majority of [adjustment] loans do not address poverty directly. Less than 20% of a sample of adjustment loans linked adjustment policies with efforts to reduce poverty. . Achievement of objectives. Evaluation data show that project success is inversely correlated with the number of years the Bank has been involved in the education sector. Disaggregated by region.. C. and institutional development. the likely economic impact of proposed operations on the poor. but higher in East Asian countries (85%). access to and quality of education. 1999) Quality of Project Investment Loans The Bank’s OED has generally measured project success relative to three criteria: achievement of objectives. Direct efforts to address short-term impact on the poorest are rarely considered.
In 1990. water. recover costs. the Bank is evaluating the relevance. 70% of projects called for increases in 303 . the Bank has a right to ensure that borrowers do not waste or misuse resources.Paying for Education The Bank is increasingly providing support for education. the application of simple. To make a sustainable. In and of themselves. the rationale for the Bank’s 1990 primary education policy draws largely on developed country experience as the basis for its policy recommendations. Still. which they themselves prepare. because the SF operations are usually carried out in parallel with federal and state programs— almost like another line ministry. and institutional development impacts of SFs. and other basic services through social funds (SFs). As a lender with fiduciary responsibility. (b) projects aimed at reducing recurrent costs rose from 33% to 78%. and local levels. sustainability.. World Bank Recipes for Educational Reform Overview The level of Bank support for education generally varies depending on a borrowing government’s willingness to undertake reforms recommended by the Bank. SF projects allow local stakeholders to determine investment decisions through subproject proposals. a comparison of loans approved in 1990 with loans approved in 1980 shows that (a) the percentage of projects with increased privatization and cost-sharing rose from 33% to 100%. For instance. However. state. decentralize. In principle. the Bank’s recipes for reform are often standardized and simplistic: privatize. This evaluation trivializes the extent to which SFs subvert the authority and effectiveness of governments. the analytical basis for Bankproposed reforms was developed in the industrial North. In general. and (c) projects to expand secondary and tertiary education declined from 50% to 11%.g. this makes sense. standardized recipes has revolutionized the Bank’s education portfolio. According to Jones (1992). if some decentralization is good. and transfer resources from higher to primary education. Their efficacy depends on the circumstances. then more must be better). There is a conspicuous lack of research and analysis of the impact of reforms based on information and experience in developing countries. these recipes are neither good nor bad. In 2001–2002. Because these recipes are viewed as “goods. health. efficiency.” then it is often assumed that there is a linear relationship between the recipe and the outcome (e. lasting contribution to social well-being. SF activities will need to be integrated with mainstream social programs offered at the federal. which operate in parallel to activities of borrowing governments.
the Bank sees a role for itself in carefully designing user fee policies so that poor people will not be hurt. the Bank beat a fast retreat from its past policies of encouraging and even requiring user fees. United Nations Educational. 36) UNESCO claims that the same logic is often applied to the issue of classroom size. World Bank. 1995.S. 177–178). such as quality and equity. Impact of Structural Adjustment on the Employment and Training of Teachers: . 304 . Bray. 1996b). In addressing the qualifications of teachers. the focus on efficiency eclipses educational needs. deprived generations of poor children of an education. p. differences arise when such values are consistently subordinated to economic values. No other aspect of structural adjustment programmes [than teacher compensation] has demonstrated so clearly the increasing tendency of national development policies to subject education to the same costcutting logic of market forces that is applied to the overall system of production: if qualified people are willing to teach for less pay than the standard rates. van der Gaag. . the Bank’s policy on user fees was ambiguous (Adams & Hartnett. In October 2000. 67% enlisted communities in school construction.S. Cost containment is an important value when considered in tandem with the requisites of a quality education. 1996. . it often assumes that states will continue to impose such fees. 1992.N. That is. 1996a. charges for basic services impose a tax on human development (Oxfam International. C. representatives to international financial institutions to oppose any loan operation that would impose user fees for primary education and basic health care. Subsequently. and 56% contained covenants encouraging governments to support private education (Jones. Alexander primary schooling. 67% of projects reduced subsidies for secondary and tertiary students. the U. 1996. Although many policymakers agree on educational values. Impacts of the Bank’s formulaic approach to fiscal adjustment and education reform resulted in the widespread imposition of user fees. Patrinos & Ariasingam. then why not hire them? (UNESCO. Although the Bank states principled opposition to user fees for primary education. As of September 2001. pp. Hence. 56% raised tuition fees. As many studies demonstrate. 1998. Too often. There is broad agreement among communities of educators and economists about the importance of certain economic and social values. Scientific and Cultural Organization’s (UNESCO) 1998 World Education Report cites the International Labor Organization’s 1996 report. government enacted a law requiring U. much as a factory manager would attempt to increase output while cutting costs. in seeking economic efficiency one can continue decreasing the teacher–pupil ratio. which in turn. 2001).
and (d) construction costs—simplify designs. reduces poverty. external efficiency focuses on how education translates into jobs. (b) reducing repetition and dropout rates. multigrade teaching. the provision of simple. multiple shifts. standard answers to complex needs can be unhelpful. Increase the private costs of higher education. the government will be unable to facilitate achievement of education goals.Paying for Education Measures of internal efficiency may relate to (a) staff efficiency— student–teacher ratio. Implement demand-side financing. However. Recipes As noted earlier. Transfer subsidies from higher education to basic education. the Bank emphasizes the benefits of a lower teacher–student ratio [fewer teachers per class] and shifting expenses from salaries to training and educational materials). In contrast. reduce public financing of vocational education. Especially for weaker borrowers. This is worrisome because governments must be able to monitor and evaluate the policies and practices of a burgeoning number of actors in the education sector. Because staff with advanced degrees in education are in such short supply in the Bank. • • • • • Privatize. the Bank has five major policy prescriptions for the educational challenges of borrowing countries. The Bank packages such products in adjustment or project loans. if the Bank’s analysis had greater depth. promotes productivity gains. It is possible that. standardized solutions. Recover costs through user fees. If such actors lack accountability to governments. staff deployed to the Bank’s education unit often look for simple. such as universal primary education. (c) efficiency of facility use— percentage of time (day/week/month/year) facilities are occupied. finance loans for low-income 305 . and increases social mobility. and lengthened school week and school year (in general. the Departments of Education would seek out Bank experts in Western countries. Decentralize. their capacity grows. use appropriate materials and community labor while upholding safety and building standards. the Bank does not receive contracts from countries in the OECD. If institutions in borrower countries are challenged to design solutions to their unique circumstances. Here are two typical Bank policy packages: 1.
Public schools that are privately managed. involve the private sector in financing and service delivery.N. Alexander students. Here. and transfer public resources from higher education to basic education. five of which are located in West Africa. provide incentives for teacher achievement. there are insufficient data to know this with any degree of certainty. Some estimate that private investment accounts for one third of education spending globally. offer families a choice of schools. whereas public investment accounts for two thirds of spending. Privatize To some. the term is intended to encompass all aspects of private-sector and nongovernmental involvement in education. World Bank Group Strategies The World Bank Group (including the private-sector affiliate. Management. which often involves providing parents with vouchers that permit them to choose their children’s schools. 3. To improve resource utilization. Privatization can involve the transfer from public to private hands of: • • • • Ownership of education facilities and other assets. 2. Private schools subsidized by public money. the IFC)16 emphasizes three options for public–private collaboration in education: 1. Financing. the borrowing government should: decentralize by establishing school-based management. Parental choice. and monitor educational outcomes and achievement. 2. In fact. Delivery of education services. 16 The IFC committed to seven education projects in FY 1998. increase class size. Each policy prescription is defined and described in the following section. 306 . C. privatization connotes transfer of ownership of education facilities from government to private or nongovernmental entities.
student achievement has not been improved after almost a decade of obsessive focus on standardized testing. India—11%.Paying for Education The Share of Private-Sector Investment The proportion of total spending from private sources ranges widely: Haiti—80%. Some governments. What is surprising at first is that outputs—massive levels of standardized testing— have not redirected funding within education systems in any significant way. the growing.g. Hence. Kenya—38%. higher test scores). is considered an “output” or a “result. including the following: • The difficulty of targeting subsidies and leakage. after students pass standardized tests). Uganda—57%. For instance. firms do no better than public schools. student achievement. In education systems in the United States and elsewhere.. 307 . 90% of primary school students are enrolled in public education systems (World Bank. education systems will be administered through outputbased aid (OBA) schemes.. Even when school districts use performance contracting to hire and pay private firms to produce a single output (e. been shown to cost more than subsidies themselves. the government will absorb costs of funding schools after they have scored high on key capacity-building areas. the bureaucratic apparatus needed to conduct means testing to target subsidies and exemptions has. The sector has been beset with confusion about what criteria to use to award funding increases to high-performing or low-performing schools. in some cases. large-scale resistance to the emphasis on standardized testing by parents and educators. 53–55). OBA focuses on achieving measurable results. provide low-quality or no service).g. 1995a.9%. or capture. and Venezuela—27%.. have systems for supplanting private financing with public financing.g. as measured by success on standardized tests.” But in the United States. Boosting Privatization of Education Through Output-Based Aid Schemes Increasingly. in which the government delegates service provision to private (or nonprofit) providers and compensates providers only after services are delivered (e. The chances of poor people receiving services through output-based schemes are poor for a host of reasons. However. In India’s Maharashtra State. of subsidies by well-to-do groups. pp. Hungary—6. such as India’s. • The incentives for private providers to pocket subsidies or inflate losses (e.
The Bank has helped to establish SFs in 22 countries. However. which will exacerbate cultural conflicts. C. education. the government provided incentives for private schools to compete with public schools by providing vouchers for both. • The lack of judicial mechanisms that permit poor users to appeal or seek recourse when a contractor fails to deliver services in the specified manner. delivering social services and creating jobs. It is unrealistic for the PSD Strategy to assume that an arm’s-length relationship will exist between borrowing governments and service providers • The fiscal liabilities assumed by the public sector when OBA schemes fail. in partnership with the government and in association with a World Bank–financed project. SFs were originally designed to accompany adjustment programs in Latin America. contractors in OBA schemes will be international or foreign service providers. They can also cater to special interests. affordability and accountability problems. which can oversee and enforce OBA contracts and ensure that services are delivered in acceptable ways. As noted earlier. The percentage of subsidized private primary school enrollment has doubled and stands at one third (33%). Honduras. as required by OBA schemes. Beginning in 1980. Usually. Funds generally pool resources from multiple donors and creditors. SFs have become widespread. including Bolivia. • Resistance to foreign service providers. Uganda. Ethiopia. Colombia. Cameroon. SFs channel monies to local communities for smallscale projects to reduce poverty by. SF programs fail to coordinate their activities with those of government ministries. domestic service providers will lack the “deep pockets” for up-front financing for health. British Petroleum. or water services. and Zambia. Increasingly. Alexander • The lack of regulatory mechanisms. Senegal. Because the SFs bypass government bureaucracies.N. access. Examples Chile. is setting up pilot proj308 . Social Funds One way of devolving government responsibility for education is the SF. among other things. they sometimes offer speedy services.
Cons • The responsibility of federal.. which the Bank’s affiliate. public education is often biased against the poor. where private schools are subsidized with public money.g. recurrent expenses. • Unlike public systems that can run deficits. calls “edupreneurs. which students can use to attend private schools. private systems must exercise financial discipline and still remain competitive.Paying for Education ects in municipalities to establish integrated family care centers. the IFC. Thus. • Teachers’ unions can sometimes protect the employment and wage interests of public teachers at the expense of other interests (e. In turn. British Petroleum is involved in large-scale oil exploitation in various parts of Colombia. such as universal primary education. Colombia has also initiated a Bank-supported program to provide vouchers (financed by the central and municipal governments). Pros • Like private education. • In some countries. • Fewer and fewer Bank loans by the end of the 1980s were free of the obligations imposed by loan conditionality to promote the privatization of education through the building up of systems of private institutions and the expansion of user charges in the public sector. financial discipline can be compromised. such as materials and training). In the case of public or private provision. the public-sector provision of education is highly inefficient and poor in quality. OBA schemes and SFs often circumvent and undercut the government. in both public and private institutions. • Private-sector actors. However. Bank-promoted subsidization of private schools increased to questionable levels when it was in clear danger of jeopardizing public commitments to educational quality.” and NGOs are not always properly equipped to provide 309 . state. access to education for disadvantaged groups can require subsidies. this can undercut achievement of education goals. These deficiencies reduce demand for education. and municipal governments for oversight and supervision of the education sector can diminish when education functions are transferred to the private sector. • In theory. private school systems can foster greater financial accountability. World Bank support for private school subsidies has been controversial.
SF innovations. or clothing. • Sometimes poorly functioning systems. which are intended to subsidize the direct or indirect fees for private (or public) education via vouchers or other means. girls contribute more significantly to work around the home than do boys. SFs should also address the capacity-building needs of local organizations. and technologies should be mainstreamed into publicsector programs. Consequently. secondary schools impose more significant fees on families than do primary schools. Formal tuition fees are uncommon at the primary school level. In general. It is significant to note that families need to make tradeoffs with respect to the education of their children. impede access to education (Lennock. this is the main kind of cost recovery at the primary education level still officially sanctioned or advocated by the World Bank. The contributions of foreign aid to the capital costs of construction are widely criticized. and integration with government-provided services. Recover Costs The term cost recovery refers to the following: • The cost of constructing educational buildings and facilities. they constitute a parallel delivery system. In fact. C. • Private teachers are usually not able to protect their interests through collective bargaining. It is now common practice for such communities to absorb the cost of constructing school facilities. Their niche is usually in small-scale innovation. Children of low-income and racial or ethnic minority families are often “ghettoized” in public school systems that underperform their private-sector counterparts. effective monitoring and supervision. • Private school systems can increase social stratification and rural–urban divisions. • Textbook fees and the topping off of teachers’ salaries are commonplace. There is also the cash income foregone by children obtaining an education rather than working for pay. • To succeed. Alexander high-quality formal educational services on a large scale with financial accountability. SFs require strong project selection criteria. • The less visible costs to families involve: the costs of travel to and lodging in proximity to schools and the costs of food and uniforms. Aid is blamed for excessive costs for facilities that are often inappropriate to the needs of communities. Increasingly. Currently.N. principles. • There are also opportunity costs—namely work that children cannot perform at home when they are at school. parents who decide to pay the bill for one or more 310 . 1994).
materials. beneficiary 311 . You have to pay for everything. increasingly. waiver and exemption systems often fail.g. Zambia. Parents said: “It is like the institution is privatizing itself. Examples Nicaragua. parents equated decentralization. or participation. • Using both cost-recovery and demand-side financing mechanisms may be inefficient when a majority of the students in the locale or country are poor. They now say education is no longer free. However. recovery of costs can help ensure efficient and effective spending. Thus. • In theory. The system became highly controversial and altered social relations inside the school.Paying for Education secondary school students may find the direct or indirect costs of educating a primary school student less affordable. In the Bank-financed project that decentralized school management (see following section. and Ghana. • Many countries have limited capacity to administer cost-recovery and demand-side financing mechanisms. Cons • In practice.. for low-income families. fees can be a barrier to school enrollment and completion. Bank-financed projects still emphasized the supply side of education—provision of buildings. “Decentralize”). Pros • In theory. and technology. cost-recovery schemes can waive fees for primary school and low-income children. Implement Demand-Side Analysis and Financing Description of the Issue In the 1990s.” Oxfam International (2001) provides additional examples of how education charges constitute a tax on human development in Tanzania. with the imposition of fees (cuotas) on impoverished rural families. the Bank is conducting demand-side analysis (e.
enrollments were declining for poor populations in Côte d’Ivoire. • Incentives to increase the number of female teachers in rural areas through provision of scholarships. regardless of the size of the family or the number of children in the family) to every low-income family with children aged 7 to 14. Such strategies may involve stipends (cash payments). vouchers (usually publicly financed cash payments). p. • Provision of secure transportation to and from schools in areas where school closings have led to consolidation. Eligible families were in the lowest quintile of the income distribution (with an income level less than $50 per month per family member) and employed or searching for employment. • Introduction of flexible school schedules. especially those that can induce attendance of girls (e. C.. community financing (through monetary or nonmonetary contributions). lavatories. low-income students. including: • Construction.g. The gap in enrollment and in educational progress widened between the nonpoor and the poor. between urban and rural areas. child care policies allowing siblings to accompany students. and provision of double shifts that make it easier for parents to forego girls’ help at home. and other marginalized or disadvantaged groups. For instance. in Turkey. Alexander or social assessment) to identify problems that impede school attendance of girls. and scholarships. and between various socioeconomic groups (Grootaert. 312 . education loans can be designed in ways that increase school attendance. The program provided a stipend (or bolsa) equivalent to a minimum wage ($128 per month per family. housing. or provinces). During the late 1980s. In other words. secure boundary walls. and female teacher housing). 1994. extension. 131). school dropout rates in Brasilia were dramatically reduced when Governor Buarque established an innovative scholarship program. In 1995. increases in enrollments of nonpoor children exceeded the decline among enrollments of poor children. With the benefit of such analysis. municipalities.N. A school savings program provided a deposit of approximately $90 into a savings account for each child of a participating family who successfully completed a school year. a number of measures were taken to induce girls to attend school. and hardship pay. Enrollment statistics often mask demand-side problems. and rehabilitation of facilities. despite the fact that net enrollments and education expenditures were increasing. targeted bursaries (cash payments that go directly to schools. The Bank has also undertaken strategies to compensate families for the cost of their children’s education.
Paying for Education To achieve universal primary education. of poor families. the Bank should not assume inelastic demand for education (Bredie & Beeharry. China (targeted bursary for poor and minority children and free textbooks). 313 . primary enrollment declined in at least 14 of 27 African countries surveyed. the Bank only considered strategies to offset the indirect costs of schooling. therefore. at the same time. boosting the supply of education services to disadvantaged regions and groups. 1998). Even after the significant declines in primary enrollments in the 1980s. Pakistan. voucher system). Until recently. It is puzzling that the Bank is so tentative about this conclusion. Demand-side solutions might include ensuring that IMF and World Bank adjustment policies do not jeopardize livelihoods and diminish incomes. user fees are eliminated. the Bank is hesitant about embracing demand-side solutions. and indirect costs of schooling are covered by stipends and scholarships. and Tanzania. Mexico (targeted bursary for poor and indigenous populations). Jamaica (student loans). A recent Bank publication. given the evidence about how declining income and employment opportunities influence the decisions. rural girl students). and Pakistan (subsidies to private schools servicing low-income. • Where targeting of low-income children or girls is effective. “School Enrollment Decline in Sub-Saharan Africa: Beyond the Supply Constraint.” notes that between 1981 and 1991. Colombia (targeted bursary. Pros • Demand-side financing can reduce or eliminate family costs for schooling and raise enrollment rates. To that end. Chad (community financing). it analyzed the effectiveness of funding student subsidy schemes to increase enrollment among the rural poor in several countries. including Bangladesh. Examples The World Bank has instituted a variety of demand-side financing schemes in Bangladesh (stipends for girls). it is essential to boost the demand by poor families for education by protecting and increasing incomes and. Brazil. It concludes that declining incomes and employment opportunities may affect household decisions and. demand-side financing can enhance equity. including education decisions.
foregone income) may be prohibitive. The Educacion con Participacion de la Comunidad decentralizes education by strengthening direct involvement and participation of parents and community groups. However. In the Brazilian state of Minas Gerais. The theory was that greater responsibility on the part of parents. 1998). Nicaragua. such as Latin America. and personnel issues is seen as a remnant of colonialism.. In some countries and regions. The program has had discouraging educational outcomes (Jimenez & Sawada. • Systems may be difficult to administer. such as states and municipalities. centralized control over school funding. there were often long time lags (6–9 months) in benefit payments. and school adminis314 . Brazil. clothing. Educational standards have improved. families were required to travel long distances to apply for exemptions to fees. Nicaragua decentralized management and budget decisions to local school councils (consejos directivos). teachers. • Stipends may be misused or siphoned off. • A social stigma may be attached to children in the populations targeted for assistance.N. C. transportation. and dropout and repetition rates have dramatically declined (UNICEF. it did lead to higher teacher attendance rates (World Bank. 1998b). curricula. Alexander Cons • The costs of applying for a waiver may be prohibitive. Furthermore. It was conceived as a way to expand access to education for children in remote rural areas. Indirect costs of schools (e.g. • Financing may only compensate a family for partial costs of schooling. Decentralize Decentralization entails devolving the responsibility and the operations of the educational system from the federal government to subsidiary levels of government. Examples El Salvador. in press). decentralization shifted responsibility for decision making from the state capital to school boards headed by an elected principal and composed of equal numbers of parent representatives and school staff. In Zimbabwe.
The Bank’s vice president and chief economist for the Latin America and Caribbean region summarized the pros of decentralization this way: Because local governments are better than national governments at recognizing the needs and preferences of local residents. there was insufficient parental participation. (Burki & Perry. • More accountable to the local population than are centralized governments. Many parents resented the imposition of fees (cuotas). the phone . 1997. created conflict. poorly functioning teacher incentive systems. and because local governments are at least as efficient as national governments at delivering public goods that benefit only local residents. which would raise school achievement. but we should say it is voluntary. . 81) 315 . “During the [decentralization] workshop we were told that we should ask parents for a cuota of 5 cordobas. • More flexible in adapting to changing local circumstances.” • Teachers said.” Pros Decentralized governments are expected to be: • More efficient in responding to demands for the delivery of services. as opposed to national. this is what autonomy means to me. which were unable to squeeze sufficient fees from poor families. In addition. officials. now the burden is on our shoulders. . and insufficient responsibility on the part of directors for improving pedagogical methods or monitoring school repetition and dropout rates or achievement. parents said: • “We are responsible for higher cuotas [to pay] for electricity. confusion over who actually had the power to hire and fire teachers. When asked what decentralization meant to them. it will be more efficient to have local governments provide the optimal level of public goods in each local jurisdiction.” • “Now the Government is no longer sending the amount of resources the institution needs . the water. Local governments can be expected to be more efficient than national governments because local residents may find it easier to hold accountable local. .Paying for Education trators would result in greater accountability. p. Data also show that passing authority to the schools. .
(b) local governments have institutional capacity to handle their expanded responsibilities. especially by children from low-income families and from ethnic and racial minorities. community. the democratic process works well enough to provide sufficient electoral discipline. and (d) there is a correspondence between the costs and benefits of government programs. World Bank. and decisions are more visible and accountable. family.N. 1998. Policymaking should emphasize basic education. many localities become overloaded as the federal or state government devolves an increasing number of responsibilities. • Decentralization cannot increase equity unless state and local governments are equitable and transparent and possess adequate resources for expanding access to schools. p. (c) the decentralization arrangements between different levels of government are clearly specified. • Many localities lack the capacity or the resources to implement decentralized education programs. • In Nicaragua. in press). Alexander Cons • The federal government’s responsibility for oversight and supervision can diminish when functions are devolved to lower levels of government. wages. and society. Transfer Subsidies From Secondary and Higher Education to Basic Education The Bank places a higher priority on allocating budget resources to primary education than to tertiary education. and job security. 156) says that various circumstances must converge for decentralization to serve the people. In developing countries as a whole. C. 1995. reducing fertility. Primary education can contribute to benefits at many levels: individual. As described in the Bank’s 1980 World Development Report. 6% in higher education use 39% of public 316 . Inter-American Development Bank (IDB) literature acknowledges the need for such preconditions. In addition. the IDB (1997. decentralization was viewed as an attempt to undermine teacher rights. 1994. 71% of school-age children share just 22% of public resources for education. In Latin America After a Decade of Reforms. 1997. • It is difficult to monitor and evaluate decentralization efforts. Ilon. primary education can increase human potential and social cohesion while improving health. including (a) local officials are elected. and boosting income generation potential (Heyneman.
These methodologies are also rife with problems.. These private rate-of-return calculations have limited application (e. One Brazilian member of Congress assailed the Bank’s “short blanket” philosophy of education financing—namely that the blanket can cover the head (higher education) or the feet (primary education) but not both. Important factors still defy calculation. variable quality of instruction. Social rates of return attempt to measure the benefits of education to society at large. In Tanzania. developing countries must build on a strong primary school foundation by expanding enrollments in secondary. The cost of primary education is low relative to tertiary education. Many citizens would prefer that their governments shift resources from other sectors (e. it is also true that a university student may help govern the nation or become a private-sector entrepreneur in the near term. Methodologies for calculating rates of return to different levels of education are fraught with problems. and in-kind earning potential. Although that statistic is telling. 1985).g. Many citizens feel that the Bank oversteps its authority when it attempts to veto a 317 . the Bank exerts pressure on governments to institute significant user fees at noncompulsory levels of education. At the same time. the Bank generally stresses that borrowers must shift budget expenditures from higher education to basic education. European and North American countries provided heavy subsidies for higher education. The world’s job market is quickly bifurcating—dividing workers into skilled and unskilled categories. expenses. The World Bank’s researchers have studied the question of how education contributes to growth and found that the greatest needs for expanded education at a given level vary from country to country. They involve dividing the benefits of education (measured in projected annual income of a student) by the lump-sum cost of the education (tuition. rather than slashing spending for secondary and tertiary education. Citizens in many countries feel that the Bank is contributing to a gutting of secondary and tertiary education systems. setting tuition or scholarship policies). although they also guaranteed universal education at an early date.g. such as variable student abilities. However.Paying for Education resources. the Bank’s operations are a different story.. However. military) into primary education sector. the methodologies are still too primitive to use in policymaking. the cost of sending one student to university is equivalent to the cost of sending 238 students through primary education. vocational. and foregone earnings during school years). In its operations. To compete in a global marketplace. and higher education. World Bank calculations show that social rates of return are high in the primary years and decline thereafter (Psacharopoulos.
resources could be allocated according to proposals submitted by the universities aimed at improving performance. and secondary education to meet manpower needs. In addition. well-functioning institutions. good citizenship. In a study commissioned by the Bank (1996b). Indeed. the 318 . bursaries could be provided for students to use at the universities of their choice. and war). Ways should be found to allocate resources to universities on a competitive basis. the 1995 sector review discussion) has expressed opposition to the strong emphasis on transferring subsidies from higher to basic education. the Bank should investigate mechanisms for channeling resources to higher education to ensure at least the existence of a limited network of good universities in the region. Even the Bank’s Board of Executive Directors (e.g. which arise from the lack of education (e.” such as the contribution of education to social cohesion. 14) Social scientists and economists could try to forge methods that do not understate the real cost of education (which is highly subsidized in most countries) and understate the benefits of education. famine. this should be an argument in favor of reform rather than a reason for neglect. Likewise. social breakdown. Preference could be shown for imaginative programs that enhance a university’s prospects. the types and costs of dysfunction. African advisors recommended that: The Bank needs to review its policies of not making loans available for higher education. vocational. The bursaries could function much like a voucher system. C. with universities competing for the fee-paying students. Alexander domestic consensus in favor of significant support for higher education.. However.N. For instance. For the first 18 years (1962–1980). There were major problems with operations. the Bank’s goal was to support construction and equipment for technical. IMF and World Bank Approaches to Structural Adjustment Overview The Bank has worked in the education sector since 1962.. attempts to put a price on “externalities.g. Thus. (p. are incalculable. or individual fulfillment may prove as illusive as valuing the beauty of a pristine forest instead of its value as timber. Although higher education in Africa is expensive and not very effective.
In fact. and if it does. . Haddad reported that “completed buildings were considered inadequate in quality and educational relevance in 40% of the projects. which among other things. the benefits do not always “trickle down” to poor people.17 There is also a disturbing pattern of widening income inequality within countries. per capita income growth in the period 1980 to 1997 (after SAPs were introduced) is much lower than per capita income growth in the 1960 to 1980 period (before SAPs were introduced). there were increases in primary and secondary school enrollment in nearly every country.Paying for Education Bank’s first education policy paper was issued in 1971. Regarding capital investment in diversified secondary schools. . The conditions attached to adjustment loans require governments to take actions intended to help achieve fiscal equilibrium and macroeconomic stability and stimulate growth. . Typical SAP measures include downsizing or decentralizing government. . In fact. and administrative and management support. declines in school enrollments began in about 1980 and grew during the decade. spawns political and social unrest. There were also major problems in the provision and utilization of laboratories and workshops” (Jones. The purpose of education lending was also expanded to include software. removing import barriers. devaluing the currency. directing that analysis of the education sector should precede investment lending.org/indx. curriculum development. providing incentives to exporters. SAPs have not generally improved economic performance. 1992. This gap widened from 30 to 1 in 1960.shtml 319 . to 60 to 1 in 1990. 253). Bank-financed education operations were often undertaken in the context of SAPs. many NGOs contend that vulnerable groups. From 1980 onward. . notably China). SAPs exacerbated the gap in per capita income (gross national product [GNP]) between the countries with the richest fifth of the world’s people and those with the poorest fifth. are 17 www. p. such as poor people and women. and to 74 to 1 in 1995. Critics contend that SAPs frequently cause substantial short-term pain and hardship for poor and vulnerable groups offset only by a promise of long-term gains that may or may not materialize. reforming the tax or legal system. adjustment may not always produce economic growth. and revising labor codes. in most of the developing world (with a few exceptions. In other words. almost all projects faced problems in the acquisition of equipment . However. . Similarly. There were also major performance problems in the portfolio. SAPs aim at such outcomes by restricting domestic demand and expanding production of exports.challengeglobalization. The year 1980 was pivotal. From 1960 to 1980.
cut subsidies for basic staples. When Northern demand plummets. when the World Bank and IMF acknowledged that. then developing countries suffer disproportionately. Alexander often disproportionately hurt by adjustment and receive no tangible benefits. It is taking many years for the Bank to come to grips with the social impact of adjustment. Although competition is a worthy value. the impact has often been asymmetric. in the downturns. As a result of SAPs. In other words. Even when the costs of adjustment are widely shared. One finds this reality reflected in the Bank’s internal operations. Its identity as a bank is often at odds with its identity as a development institution. there is evidence that some poor people can no longer afford to pay for services. and budget cuts often retrench civil servants. Privatization of services can raise costs. borrowing countries are increasingly dependent on export revenues to balance their accounts. but suffering equally. are vulnerable due to a variety of dynamics: competitive pressures can bid down wages. as has been the case in 2001 and 2002. global linkages have amplified the impact of the vicissitudes in world economic growth in the past few years. State-owned enterprises have often been grossly inefficient. sometimes subsidized by taxes on low-income agricultural producers. in some countries. Tight credit can reduce consumption and investment.and long-term concern. but also a medium. it is important that the structural advantages of transnational corporations are not systematically reinforced at the expense of local enterprises. especially those of low-income populations. because the institution is quite schizoid. For developing countries and economies in transition. The “right hand” of Bank economic reform appears to be poorly informed by the activities of the “left hand” of social development and vice versa. Moreover. Incomes. or more so.N. In addition. the negative social impact of SAPs was not only a shortterm concern. C. But privatization sometimes creates private monopolies or competitive systems that do not service regions in which the majority of poor populations are located. The World Bank sometimes pressures a developing country’s government to accept a pace or sequence of adjustment measures that exposes local enterprises to international competitive pressures in imprudent ways. 320 . and cut pension and social security benefits. but hunger and higher rates of mortality to low-income groups. SAPs may bring disappointment to upper income groups. with most developing countries tending to benefit less than the leading developed economies in the upturns. In the late 1980s. safety nets or conditions protecting social spending were sometimes attached to SAPs. when user fees are imposed to recoup costs of primary health care and basic education. union bargaining power can diminish.
. not binding. One of the few educators to study the impact of adjustment on education. even with results that appear to be biased. Fernando Reimers of the Harvard Institute for International Development. 127). 1996b. . Furthermore. This hinders the use and development of local capacity and results in a paradoxical outcome: key decisions are made by donors who. the Bank identifies declining primary school enrollments as a consequence of adjustment during the 1980s (World Bank. . the Bank only considers it has achieved success in its SAPs when the loan conditions result in policies that would not otherwise have occurred. The history of the Bank’s Social Development Task Force reflects a sharp divide between the Bank’s economists and noneconomic social scientists. compared adjusting and nonadjusting countries during the 1980s and found that drops in net enrollment rates were twice as likely in adjusting countries as in nonadjusting countries (Reimers. Like education sector reforms. p. Later. However. as discussed in the next section. the Bank attached conditions to SAPs stipulating that social sector budgets be protected. . emphasize the importance of policies being locally “owned. Table 2 shows the declines in primary education’s share of expenditures during this time period. borrowing governments—especially highly indebted 321 . . p. we identify flaws in the methodologies used by the Bank and the IMF. Many borrowing country officials accuse the IMF and Bank of undermining government capacity by their heavy-handed.Paying for Education the Bank is comprised of worlds within worlds that often do not intersect. 1990b). SAPs are often administered in a topdown way. [I]t could be suggested that the low morale of the civil service in many African countries was an unintended result of structural adjustment. many of these conditions were discretionary. at the same time. 14) Methodologies for detecting the impact of SAPs on education are rife with problems. As described later. 1994. . Increasingly. single-minded style of operating. How the IMF and World Bank Promote Economic Fundamentalism The IMF and World Bank promote economic fundamentalism through modulating access to external assistance by borrowing governments.” (World Bank. However. Many of the conflicts between the two groups revolved around the question of whether economic policies should be normative or nonnormative.
1 64.1 34.0 Recent Year 46.0 38.0 84.0 38. it risks losing access to all external assistance because most other creditors and donors follow the lead of the IMF. By providing or withholding the seal. DC: World Bank.0 59.6 50.0 18.N.2 64.7 43. the IMF modulates a government’s access to official development assistance and private capital flows.0 Note. The IMF is head of a creditor cartel and.0 43.0 86. Mali. it judges the policy performance of borrowing governments.0 56. which provide 75% of official development 322 . From Social Dimensions of Adjustment Operations: The World Bank’s Experience.0 84. 1980–1993 (p. Alexander Table 2 Primary Education’s Share of Public Expenditures Declines in Many Adjusting Countries in the 1980s Country Argentina Bangladesh Bolivia Brazil Chile Colombia Costa Rica Côte d’Ivoire Ghana Jamaica Kenya Malawi Morocco Philippines Senegal South Korea Togo Turkey Uruguay Zambia 1975 1980 46. Bilateral donor governments.6 62.0 34.0 53.1 46.5 46.0 1985 10. Benin. they failed to expedite privatization processes.2 33.3 37.0 33.2 43.0 39. Debt relief has been suspended for many countries participating in the Highly Indebted Poor Country (HIPC) initiative (Nicaragua. governments—must be in the good graces of the institutions to meet their financial obligations.1 46. in this capacity.0 25.0 27.0 38.5 41.0 39.0 49.9 44.0 41.8 46.0 31.0 37. 107).0 29.4 45.9 34.0 45.0 27. Copyright 1996 by the World Bank. Governments that obey IMF dictates usually obtain its seal of approval. The IMF’s seal of approval. C.0 58.2 45.6 37.3 44.0 51. Chad. 1996.0 38.0 44.4 46.0 42. Reprinted with permission. among other things. If a government loses its seal of approval.0 47.1 39.0 35. Washington. and Nigeria) because.1 45.
1996). some borrowers felt compelled to cut social sector spending to comply with binding conditions. Prior. nonbinding conditions are called structural benchmarks. or up-front. or gatekeeping. Like any bank. The Bank uses this approach when it prepares its business plan (CAS) for each borrowing country. If a SAP has multiple tranches. of a loan. Performance criteria often call for governments to achieve certain macroeconomic and fiscal targets. In the 1990s. function gives the institution inordinate and inappropriate levels of power in the international financial system. Mechanisms for modulating government access to World Bank credit. the Bank modulates the access of borrowing government to lending in ways that reward good performers and punish poor performers. SAPs often had binding conditions. or before the release of the first tranche. and IDB for their borrowers. but according to Bank analysts. Binding policy conditions attached to SAPs. from 1980 to 1993. or improvement of the wage and nonwage balance in the social sectors. which required cuts in the borrower’s fiscal deficit. In the 1990s. World Bank SAPs have two types of binding conditions: prior conditions and tranche (a discreet amount normally based on a percentage of the overall loan) release conditions. In fact. Hence. rely heavily on the IMF’s signals. or installment.Paying for Education assistance. That is.040 World Bank conditions attached to SAPs were related to the social sectors. conditions that would protect social sector spending were frequently attached to SAPs. Only eight of these conditions called explicitly for increased allocations to primary education and health care. before appraisal. It should be 323 . World Bank. This section discusses the medium-term plans of the IMF. conditions are imposed at the time of negotiation. the World Bank uses a carrot-and-stick approach with borrowers. The IMF and World Bank have a hierarchy of conditions. The IMF signaling. These conditions are seldom documented. such conditions were usually nonbinding (Adams & Hartnett. At the same time. up-front conditions were used with increasing frequency. Good performance on the part of the borrowing government leads to greater access to credit. The binding conditions of IMF SAPs are called prior conditions or performance criteria. Poor performance closes the money spigot. social conditions were rarely attached to SAPs. In the 1980s and early 1990s. which draws on the perspectives of several international actors. A more diversified signaling process. only 50 of the 3. governments must comply with tranche release conditions to gain access to successive installments of the loan. would better serve the interests of developing country governments and the stability and equity of the international system as a whole.
it is given access to more loans and a higher credit limit. which describes the investments that the Bank plans to make in the country over the medium term. Because education budgets can represent 10% to 40% of public-sector outlays. UNICEF’s (1998) State of the World’s Children Report cites Côte d’Ivoire’s Economic and Finance Minister’s reaction to the outpouring of assistance in the aftermath of the Asian financial crisis: We have observed the speedy reaction to Asia and seen the huge sums of money they have been able to come up with almost instantaneously. These mechanisms are not promoted with equal vigor with all borrowing governments. However. Critiques of Adjustment Impacts on social sector budgets. When it comes to us. Some names of these plans are The Country Operational Strategy Study of the Asian Development Bank. The CAS. and low-case scenarios) for a 3. the unequal treatment of borrowers has become more pronounced since the IMF and World Bank launched the Poverty Reduction Strategy (PRS) Initiative in 1999. the most common triggers required borrowing governments to comply with IMF performance criteria. In sum. SAPs usually 324 .5% of gross domestic product (GDP). In the late 1990s. the Country Strategy Paper of the African Development Bank.to 5year time frame. and privatize enterprises. A government in the low-case scenario has relatively few loans. Alexander noted that all creditors and donors have such plans. and the Country Cooperation Framework of the United Nations Development Program. The Bank and IMF almost never analyze the social impact of these mechanisms. One can easily get the impression of a double standard. control of the fiscal deficit was a trigger condition. often bending the rules pretty freely. base-case. the World Bank permitted the government of Brazil to borrow $4 billion to $6 billion over 3 years. Failure to accomplish triggers can diminish a government’s access to resources. binding SAP conditions. Only 15% of triggers protected education and health spending.N. As a government accomplishes “trigger” conditions. however. outlines three lending scenarios (high-case. SAPs attempt to cut budget deficits and modify the composition of budget expenditures. For instance. C. at one point. and the Bank’s trigger conditions (often IMF conditions). the Bank warned the government that it could only borrow $2 billion if its fiscal deficit exceeded 7. our negotiations can drag on for months while they split hairs and act very finicky. As described later. In this case. the IMF and World Bank promote economic liberalization through the IMF’s seal of approval. achieve fiscal targets.
Some sectors (e. . . and technologies) are especially vulnerable. Even when skewing the results in this way. the results were skewed. only 50 of the more than 3. The World Bank has documented impacts of SAPs on social expenditures during the years 1980 to 1993 (World Bank.g..18 • In many countries.. Sometimes SAPs are successful in reallocating expenditures in ways that boost enrollments. As already noted. energy. This problem which consistently emerged 18 Bullets are quotes from handouts provided by the Bank’s Social Development Department in October 1998. • Mitigation of negative social impacts of adjustment had limited effectiveness due to the reduction of social expenditures resulting from adjustment programs. the Bank worked with a sample of 53 countries for which growth data were available. household data were only available for a subset of 23 of the 53 countries. nonsalary expenses (e.Paying for Education influence the size and nature of education budgets. social spending declined in 17 of 34 countries. 1996c). . textbooks. and the composition of social spending worsened. However. . [W]ith a few exceptions. Teacher salaries make up a large share of the recurrent budget. transportation) have a large capital expenditure component for infrastructure construction and modest levels of recurrent costs for ongoing operations and maintenance. However. But the education sector has high levels of recurrent costs because it is so labor intensive. educational materials. and working conditions. benefits. the Bank found that: • Per capita social spending fell in two thirds of the countries. Consequently. • Total discretionary spending declined in 24 of 34 countries. expenditure cuts may have exacerbated the existing biases and inefficiencies in public expenditure programs.000 conditions attached to SAPs in the 1980 to 1993 time frame were related to education and only 6 of the 50 conditions explicitly called for the protection or increase of education expenditures. Where teachers’ unions exist. nonwage recurrent spending for supplies and maintenance has been severely underfunded. Small and poor countries (primarily African) were significantly underrepresented in the subset. there are problems with the Bank’s methodology. 325 . as noted in the following World Bank finding. . most countries have made little effort to shift resources into primary education and basic health care services . they work to protect teacher salaries. Hence.g. This is reportedly the case in Bangladesh and Pakistan. For instance. when the Bank extrapolated the poverty and equity implications of adjustment based on household data.
when social sector budgets had been ravaged.66 of a percent of GNP. C. education expenditures (as a percentage of public expenditures) declined in 44% of adjusting and 22% of nonadjusting countries in subSaharan Africa. There were declines in only 67% of nonadjusting countries. Thus. education as a percentage of GNP declined in 50% of adjusting countries and 29% of nonadjusting countries.64 of a percent of GNP. the IMF is using GDP deflators to obtain their results. 1995. (Jayarajah & Branson. education spending as a percentage of GNP diminished considerably more in adjusting than in nonadjusting countries. In adjusting countries. during the 1980s. Fernando Reimers of the Harvard Institute for International Development.N. education spending as a percentage of GNP declined in 67% of adjusting countries and 14% in nonadjusting countries. In real terms. In sub-Saharan Africa. and that. found that.56 of a percent of GNP. An independent analyst. the IMF has chosen to compare spending in the mid-1990s with spending in the mid-1980s. education declined in over half of adjusting and nonadjusting countries in sub-Saharan Africa. Ninety percent of education spending is wage-related. and the decline in adjusting countries averaged 0. the IMF analysis only analyzes the amount of education spending. Education as a percentage of public expenditure declined in 57% of adjusting and 17% of 326 . A fuller analysis would take into account the elasticity of demand for services among populations. per pupil expenditures declined in 81% of adjusting countries. social sector spending increased significantly in real terms. The IMF’s (1998) Fiscal Reforms in Low-Income Countries reports that over the past decade. a thorough review of the IMF’s methodology reveals three problems. In Latin America. However. as a percentage of government expenditures. First. These are welcome findings. World Bank. He also reported that. there are sharper increases in public spending on education and health than in countries without IMF programs. Reimers found that in sub-Saharan Africa the increase in nonadjusting countries averaged 0. especially vulnerable groups. wage deflators would give a more accurate reading of actual trends. In Latin America the increase in nonadjusting countries averaged 0.56 of a percent of GNP. Second. 1996c) The IMF compared social spending in countries with IMF programs to countries without IMF programs in two time slices: the mid-1980s and the mid-1990s. Alexander from Bank country reports has worsened in most countries during the adjustment era and all but crippled public social services in many countries. in countries with IMF-supported programs. and the decline in adjusting countries averaged 0. Third. which is a supply-side variable.
subsidies for basic staples are cut. In addition.. 122) In coming to conclusions about the impacts of adjustment. education expenditures declined in 53% of countries (Reimers. 1995b) found that (a) the annual average poverty reduction associated with adjustment was very small. Impacts on incomes and inequality. or the real value of wages. Frances Stewart (1995). Declines in the real incomes of teachers lead to pressure for higher wages. poor attendance or moonlighting at second jobs). Incomes can decline due various dynamics: competitive pressures bid down wages. p. Four adjusting countries had rising per capita incomes. 123). or exit from the profession. Only 46% of nonadjusting countries suffered declines in income compared to 71% of adjusting countries. and privatization of services can raise costs. pension and social security benefits are reduced. Reimers (1994) showed that the growth promised by adjustment did not overcome recessionary forces or even contribute to those forces in Africa and Latin America during the 1980s. especially for exporters. budget cuts retrench civil servants. Declines in income require households to cut expenditures by means such as opting against education for one or more children or increasing income by means such as putting children to work. As mentioned earlier. which are paid in domestic currency. The World Bank’s review of 114 adjustment operations in 53 countries from 1980 to 1992 (World Bank. diminished commitment to teaching (e. Seventy-one percent of [Latin America] countries suffered declines in per capita incomes. drew on 23 studies of the effects of adjustment programs carried out over 15 years as well as six case 327 . in Adjustment and Poverty. Incomes can rise during adjustment.g. (p. tight credit restricts consumption and investment causing unemployment. including seven nonadjusting countries and seven adjusting countries. In real terms. These trends continued in the 1990s.Paying for Education nonadjusting countries. currency devaluations increase the cost of imported goods and can lead to a decline in purchasing power. Sixty-four percent of the countries in sub-Saharan Africa suffered declines in per capita income during the 1980s. these conclusions may not be reliable given the underrepresentation of household data from poor countries. and (b) decreases in poverty were not matched by reductions in income inequality. 1994. union bargaining power diminishes.
g. Sometimes. but their response (e. and conducting research about. Only $230 million of the $4. which may target certain social expenditures to protect vulnerable populations during adjustment. which produce tradable agricultural products or labor-intensive manufacturing. Safety nets were small in Poland. the IMF and World Bank use safety nets. 328 . In 1998. Stewart concluded that the IMF and World Bank neglected and probably exacerbated the burden of exogenous factors (commodity prices and exorbitant debt servicing) on developing countries. In the six case studies. collecting information on. p..N. including the social sectors (World Bank. when SAPs reduce social-sector spending. and Indonesia. Chile.19 The Bank found that in Africa during 1979 to 1984. she stated that adjustment contributed to adverse developments at macroand meso-levels through expenditure cuts and deflation. the cost of living rose and wages fell sharply. and signs of worsening attainment were evident in Chile. Primary and secondary enrollment worsened in Tanzania. When subsidies were cut and free social services were curtailed. poverty. and introducing social funds) was inadequate. reviewing public expenditures. Loan failure was pronounced in several sectors. Social safety nets. focused on social sectors and employment promotion. reduction in food subsidies. At the same time. these safety nets usually offer vulnerable populations too little. In three regions safety nets were not used at all (UNICEF. and introduction of user charges. to peasant farms. the Bank offers external finance for the social sectors. Mexico. Mexico. Stewart noted that the international financial institutions acknowledged a need to protect the poor in the late 1980s. only 15 of 54 loans (4 of them in Mozambique) mention the importance of social safety nets. and Indonesia. the Philippines. Mexico.1 billion extended to Poland from 1990 to 1996. 19 The deficiencies of safety nets are described in detail in report of the external evaluators of the IMF’s Enhanced Structural Adjustment Facility. Fifty-five percent of Bank disbursements were in the form of adjustment loans. an IMF official stated that over the course of the last 30 years. C. Ghana. Unfortunately. Sometimes. and the Philippines. 1996. 1997a). for instance. the IMF has probably had only 10 missions go to borrowing countries to design safety nets. Stewart concluded that adjustment processes increase poverty as deflation effects overwhelm the benefits of liberalization that can accrue. 26). too late. Indonesia. Alexander studies of Tanzania. Stewart found the most prevalent deterioration was in educational access and performance.
Now the institutions can influence a borrower’s entire national development strategy—not just the policies related to their loans.. the IMF and World Bank have gained considerable power through the PRSP and HIPC programs. you participate. Citizens groups.g. joke that they are learning a new conjugation of the verb to participate—namely. citizens have not participated in shaping macroeconomic and structural policies in any PRSP process. policy conditions for new loans or debt relief are negotiated in secret within a small elite group of IMF and World Bank officials and high-level officials of the finance ministries of borrowing countries. Another rationale was to ensure country ownership of their own development future rather than to have reforms dictated by creditors and donors. The IMF and World Bank promised that PRSP processes would give citizens’ groups and their governments an opportunity to design SAPs in ways that would reduce poverty. They reject PRSP processes that only appear to protect that right. he/she participates. The PRS initiative requires that all low-income borrowers design medium-term national development plans. One rationale for the initiative was to ensure that savings from debt reduction efforts (e. There were great hopes that PRSPs would mark a break away from one-size-fits-all approaches for developing countries and that. In fact. describing budget priorities and ways to channel savings from debt reduction). The role of citizens is narrow (e. 329 . However. especially education and health programs. we participate. governments have a devilish choice: either heed their citizens or heed their creditors (who have the last word in endorsing the PRSP).. the PRSP initiative has not changed basic things. As before.” The promises of PRSP have not been realized. and they decide. the HIPC Initiative) were channeled into social programs. However. On the contrary. Citizens are encouraged to engage in monitoring education and health expenditures by their governments to ensure governmental accountability.g. called PRSPs with input from citizens’ groups. with participation of a wide group of actors.Paying for Education The PRS Initiative Many champions of education welcomed the launch of a 1999 PRS initiative by the IMF and World Bank. you participate. “I participate. Preparation of a PRSP is a precondition for a borrower’s access to external assistance and debt relief. They often cannot get access to basic information and documents that would be required for effective participation. Citizens’ groups want the right to shape their countries’ future. diverse approaches to development would flourish. which are involved in so-called “participatory” processes.
g. social funds) are often add-ons to adjustment operations. The premises of structural and sectoral adjustment programs need rethinking by a broadly representative group in borrowing countries and internationally. (The evaluators looked at 21 highimpact adjustment lending [HIAL] operations in 17 countries exceeding $2 billion in FY 96–98. which define the terms and conditions of World Bank and IMF involvement in the country. which constituted 63% of loan approvals in FY 1999. There is growing awareness of how adjustment can undercut progress in education and development. the Bank’s own evaluators say that poverty reduction requirements are “routinely neglected” in these operations. Yet. (b) The World Bank encourages bor330 .. The Bank claims to judge its programs by their poverty impact. The Bank is clearly using the wrong criteria to judge the performance of its operations. too late. Social programs (e. the IMF and World Bank should work with borrowing governments to disclose draft adjustment programs. Although the Bank claims that 93% of adjustment operations are rated as satisfactory. Recommendations Adjustment Operations Adjustment operations should be transformed and scaled down or discontinued. to too few vulnerable people.N. available to the elected officials and citizens of the borrowing countries? Are they available in draft form to facilitate participation? Three points should be emphasized: (a) If broad ownership of adjustment operations is desired. poverty impact is not a criterion by which the Bank judges adjustment operations. Alexander Citizens’ groups are supporting the Global Campaign for Education. For the most part. safety net programs. which calls on the World Bank to work with governments to ensure that all PRSPs include strategies to guarantee that every EFA goal is met and to eliminate all charges for basic education within 3 years. To date. sectoral and structural adjustment programs are carried out in parallel with other development efforts.) Criteria by which the World Bank and IMF design and evaluate adjustment programs might include: • Transparency: Are the documents. in general. these programs offer too little protection. The Campaign also calls for deep debt relief to countries with strong national EFA plans. Evaluators were unable to judge the poverty impact of Bank-financed adjustment programs in the world’s poorest countries. C. there have been few efforts to design SAPs in ways that prevent social hardship. Frequently.
Impact assessments can help resolve conflicts that arise between adjustment goals and education goals and protect educational progress. (c) The World Bank should disclose adjustment documents after Board approval. • Likely impacts. including PRSs. which constitute the framework for IMF and World Bank lending to low-income countries. In addition. Academic institutions and civil society organizations (CSOs) are developing the independent capacity to undertake impact assessments and impact monitoring. monitoring. New policies should protect and advance educational goals.. education? Are they reducing poverty and inequality? Are export incentives depleting the natural resource base? Are adjustment monies being recycled to service unpayable debt? Are labor flexibility provisions undermining the rights of workers? (See the following discussion. northern. Adjustment loans should not be implemented without popular consent. and quality of. The IMF and World Bank should ensure that its binding SAP conditions support education goals. and evaluation of operations. some PRSCs) are disclosed. Frontier thinking in innovative qualitative and quantitative methods of impact assessment should be developed in collaborations among southern. Such triggers should always protect or expand education and health budgets. Who is involved in identifying adjustment priorities and designing adjustment operations? Elected officials? Workers? Educators? Groups of poor people and their representatives? As it stands. and transition country CSOs and think tanks. Impact assessments should be conducted to determine the social consequences of the trigger conditions associated with World Bank CASs. because it is inappropriate for the IMF and World Bank to work with Finance Ministry officials beyond the public view. At present. 331 . only a few adjustment documents (e.) Impact Assessments The World Bank and IMF could routinely conduct assessments of adjustment operations to help ensure that universal primary education goals are achieved. Such disclosure should be mandatory. such as the following: Are adjustment reforms expanding access to. there is a need for independent capacity to undertake assessment. The institutions could also conduct dynamic assessments of sectorwide and countrywide strategies. • Social consensus relative to adjustment. Ultimately. as indicated by factors.g. adjustment programs are sometimes geared to overcome domestic opposition to reforms.Paying for Education rowing governments to disclose documents initiating adjustment programs (Letters of Development and Sector Policy).
in the 1980s. can lead to poorly performing operations. if governments exceed IMF targets for borrowing. World Bank pressure instituted user fees for basic education that deprived many children of their right to education. In recent years. 1998). Rapid design and implementation processes can sometimes militate against popular participation. at the same time. p. the Bank’s formulaic approach to the education sector (e. the Bank has developed new incentive systems. which. they risk violating their agreement with the IMF and losing their IMF seal of approval. 1990. decentralize. C. Hence. recover costs) often prevails. 1998. management incentives tend to accelerate project preparation. For instance.. which rewards managers for moving money rather than getting results on the ground. 332 .g. For many years. At present. 1994). in turn. 1998.. improved enrollment or literacy rates). & Valenzuela. 9). In addition. homegrown policies and processes that will improve educational outcomes (Bredie & Beeharry. Alexander Impact assessments can also ensure that education resources are not diverted to other purposes. In other words. Quantity Versus Quality of Education Lending The World Bank’s financing of education fell from an average of $2 billion per year in the 1990s to $1 billion per year for the last 2 years. Bank critics have decried the Bank’s incentive system. Many governments object to the way in which the IMF diverts grant aid and concessional assistance (Foster & Thomas. in countries with active IMF programs. Wolff. Education aid is highly fungible—more fungible than aid for most other sectors. Incentives to borrowing governments encourage timely and efficient procurement and disbursement. 1996. However. privatize. This is only good news if external assistance supports good. Lending should only be scaled up in support of homegrown strategies for educational progress. Schwartz & Sack.N. Schiefelbein.g. creditors and donors often administer sectorwide approaches to education that lack sufficient domestic leadership. This is because it has such a large requirement for scarce local cost financing (Agbonyitor. IMF targets for reduction of budget deficits may divert grant and concessional assistance from the education sector. External resources in support of education reform can come with too many strings attached. the World Bank is under tremendous political pressure from the United States and other shareholding governments to expand loan and grant assistance for education. Now. which are intended to reward managers for achieving results (e.
participation is impeded by factors. the IMF and the World Bank must disclose draft documents if they wish domestic constituencies to participate in the formulation of loan operations. education. Final CAS documents should be publicly disclosed. Participation Borrowing governments and their citizens should design their own solutions to policy problems. the thesis being that quantitative expansion at the expense of qualitative improvement soon proves to be not only inefficient but also extremely inequitable” (p. CASs) reveals that citizens’ groups 333 .. Where such schemes are used. 15). However. In addition.g. The Bank often assumes that decentralization of education services will enhance participation and education outcomes. such as the IMF and World Bank. Feedback from many participatory processes (e. Finally. and water—it is essential that the capacity of governments to guarantee universal services is strengthened.g. “Education. the Bank should work with borrowing governments to ensure that draft CASs are publicly disclosed and discussed and that feedback is integrated into final CAS documents. they should adhere to all World Bank operational policies. At present. PRSPs) should not be subject to endorsement by external creditors. and local governments frequently lack the capacity and resources to manage education systems effectively. Approaches to participation are usually “shallow”—that is. the IMF and World Bank should scale down programs that undermine the effectiveness and accountability of governments to their people (e. For instance... SFs and OBA schemes). Growth and Inequality in Brazil. The national and sector-specific strategies of borrowing governments (e. The institutions should determine whether they wish to invest in homegrown solutions or continue to undermine domestic processes in borrowing countries.g.Paying for Education The inverse relationship between the level of lending and the quality of lending is especially relevant to the education sector. they extract information and opinions and stop short of giving stakeholders a voice in decision making. many federal government functions are being decentralized. “it is that of the quantity-quality trade-off. Especially in the area of basic services—health. such as: • Participation for validation.” Birdsall and Bruns (1996) stated that if the study has a single theme. In a Bankfinanced evaluation of a major research study. PRSPs.
it depends on how they are implemented. on research in developed countries. . government compliance with these recipes often determines how much access it obtains to World Bank education resources. the Bank should not undermine the accountability of borrowing governments to their citizens. A Bank official describes the pressure to lend: The notion of national ownership is in flagrant contradiction with the contract concept (to deliver projects) prevailing in the Bank . together with the scale and pace of lending operations. As developing country governments downsize. . C. Experience shows that privatizing into an unregulated environment can be a disaster—especially when it comes to basic services. they often transfer power to the private sector and responsibilities for social service provision to the private sector and citizens’ groups. Alexander feel as though they are being asked to validate decisions that have already been made. • The pressure to lend. which triggers Management to increase it by speeding project preparation. Reducing the number of contracted projects to allow greater local participation is apparently not a viable alternative. 1996) • Top-down prescriptive approaches to lending. Most developing country governments believe that World Bank participatory efforts overstep the institution’s mandate and pose the risk of undercutting their authority. Creditors. The “recipe” approach can undermine the capacity of educators in developing countries to wrestle with the complexity of their own circumstances. if the country moves too slowly under participatory arrangements. Countries like the loan proceeds not the policy content of the project. the Bank would facilitate and support government–civil society dialogue rather than supplant it. hence Bank staff take over at the cost of local participation/ownership. Clearly. the pipeline will become too small relative to the contract. standard recipes for education based. militate against meaningful participation. The World Bank often implements these recipes indiscriminately. significantly. • Domestic opposition to Bank strategies that reduce the role of the state. Phony participatory processes can undermine democratic processes as much as autocratic processes do. this limits possible local ownership. In and of themselves. The Bank’s education reform prescriptions are often simplified. Ideally. these recipes are neither good nor bad. The culture and incentives of the Bank.N. should not coerce governments into privatizing without the knowl334 . as if they were “magic bullets.” Moreover. • Hostility of borrowing governments to Bank consultation with civil society organizations. (Schwartz & Sack. such as the Bank and IMF.
deeper debt relief and cancellation should be provided to more countries in more expeditious ways. become unsustainable in the near future. and the debt burdens of most of those countries will. doctors in the health sector) than they are to educators. Of the 23 countries.g. including providing grants for IDA borrowers. the economist-dominated agencies often bypass the concerns of educators in recipient countries— resulting in education projects and policies that are often ill suited to their environment. demand for education loans often sags for reasons. As it is. once again. to minimize problems relating to fungibility. Bank education resources should be concentrated in countries with strong National Education Action Plans and a commitment to popular participation in education system reform.. waiving counterpart funding requirements. Governments 335 . • Most education expenditures are recurrent expenditures. and implementation. Debt Relief and Domestic Financing The HIPC Initiative is inadequate. which is needed to service World Bank and other foreign debt and purchase imports. over half spent more on debt than on primary education in 2001 (Oxfam International. such as the following: • Investments in education do not generate foreign exchange revenue. Schemes such as SFs and OBA programs can undermine the authority and effectiveness of government programs. • Attitudes toward educators. After 5 years of negotiations. The Bank should explore ways of making education loans more affordable for low-income countries. domestic cost financing. Aid and creditor agencies are far more deferential to experts in other sectors (e.Paying for Education edge and consent of citizens. or permitting debt service in local currency. the HIPC Initiative has provided debt relief to 23 countries. education materials. 2001). and school maintenance. In addition. • Most World Bank-financed projects require that the government put up about one fifth of project costs in counterpart funds. such as teacher salaries. As a result. that require high and sustained levels of local financing. This is especially the case when such programs give international actors (private firms and NGOs) a dominant role in sensitive education and health arenas. To free up resources for education and other essential purposes.
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