Domestic financing

Domestic budgets, already under pressure from the impacts of COVID-19, are being squeezed further by rising food and commodity prices. Compounded by rising levels of debt and the increasing frequency, severity and cost of climate-related disasters, these conditions could impact education budgets for generations to come.

Even before the pandemic and the current crises, globally countries were not spending enough on education, and variations in education spending lead to very different learning experiences for children. The need to invest in education has never been greater.

Domestic financing is the most significant and sustainable source of financing for education. In 2021, GPE partner countries allocated 18.6% of their budget for education on average. But about a third of this spending is inefficient.

GPE uses incentives and results-based financing to support governments to both increase domestic spending and ensure that it is equitably and efficiently spent.

GPE focuses on leveraging more and better domestic financing as the most significant and sustainable form of financing for education.

A holistic approach to domestic financing is a key component of GPE 2025 to enable education system transformation. Action around domestic financing is built around three pillars:

• Volume: Allocating adequate resources to education to accelerate progress towards quality education for all.
• Equity: Ensuring financing is allocated and spent to reach the most marginalized.
• Efficiency: Ensuring that funds go as far as possible for improving learning.

GPE's approach includes incentives and requirements aimed at improving domestic financing for education to transform systems. Most GPE implementation grants use results-based financing to drive the delivery of transformative programs.

GPE also recognizes the need to engage in strategic dialogue with ministries of Finance and support strong communication between Finance and Education ministries. Improved accountability for spending and demonstrating convincing results is a key step towards stronger dialogue between ministries of Education and Finance.

GPE promotes an inclusive sector dialogue to promote civil society participation in budget tracking and monitoring, and improve transparency and accountability in education spending.

GPE advocacy on domestic financing connects political advocacy and country programming to help drive political will and translate commitments into budget action. Through Education Out Loud, the world’s largest education advocacy and social accountability fund, it supports civil society organizations in more than 60 countries. It strengthens them to influence education policy dialogue on education. Inclusive sector dialogue enables civil society participation in budget tracking and monitoring to improve transparency and accountability in education spending.

Around two-thirds of resources for education in low and lower-middle income countries come from domestic public expenditure.

GPE assesses national education financing against internationally agreed benchmarks and helps build capacity to track the use of domestic finance and improve the availability of data to support transparency and accountability.

Allocating 20% of domestic budgets to education remains central to country-level dialogue and advocacy. This should be complemented by a broader dialogue on fiscal space.

Mobilizing more resources is critical. To reach SDG 4, a nearly $200 billion annual gap in education financing in low-and lower middle-income countries will need to be filled, with the lion’s share from domestic public expenditure.

In low-income countries, primary-school-aged children from the poorest quintile are over three times more likely to be out of school than children from the wealthiest quintile.

Although education access has improved, too many children in school are left behind in learning, reflecting systemic inequities and inefficiencies. Children who achieve basic literacy skills by age 10 in low and lower-middle-income countries are more likely to come from wealthier urban families, reinforcing patterns of poverty and disadvantage.

By monitoring domestic financing through an equity lens, GPE seeks to ensure that financing mechanisms to support equity are hardwired into education budgets, targeting funds to the most marginalized children, schools and regions.

GPE advocates for increased social sector spending (health, nutrition, social protection) as cross-sector synergies can drive improvements in access to schooling, learning and can strengthen education system resiliency.

Read more: Nepal's Equity Index

GPE works to ensure that minimum resources achieve the best educational outcomes. By addressing inefficiencies such as high repetition and dropout rates, procurement waste and inefficiencies in teacher management and distribution, partner countries could save up to one-third of their education budgets.

Read more: Tanzania - Making financing work better

COVID is increasing a huge annual financing gap to reach SDG 4 by one third, from $148 billion up to almost $200 billion.

The economic downturn from the pandemic is likely to affect education financing for years and education budgets are not expected to grow at the same rate as before the pandemic.

COVID has strained national economies and budgets, and countries face additional costs of reopening schools and keeping them open safely in the face of shrinking economies and growing debt burdens, risking decades of progress on education.

• A number of lower-income countries have cut their public education budgets since the onset of the pandemic.
• Household spending, a significant contributor to education financing in lower-income countries and for the poorest families in those countries, is expected to drop as COVID could cause an additional 93 million people to fall into poverty, resulting in increased dropout rates.
• Millions of children risk returning to even more under-resourced learning environments, exacerbating existing inequities.

To build back better, more resilient and equal education systems after COVID, we need smart investments in education, including protecting and improving domestic financing to pre-COVID levels and beyond. Education is critical to the COVID response and recovery.

At the July 2021 Global Education Summit, there was high-level support from GPE partner countries for domestic education financing.

In an unprecedented action, 20 Heads of State made a clear commitment to prioritize the education sector, pledging to work towards spending at least 20% of national budgets on education over the next 5 years by rallying behind a political declaration led by President Kenyatta.

Additionally, 25 countries made individual commitments to prioritize and protect the volume of education financing and improve its efficiency and equity.