Monitoring the impact of the financial crisis on international aid

Transcription

1 2011/ED/EFA/MRT/PI/02 Background paper prepared for the Education for All Global Monitoring Report 2011 The hidden crisis: Armed conflict and education Monitoring the impact of the financial crisis on international aid Development Initiatives 2010 This paper was commissioned by the Education for All Global Monitoring Report as background information to assist in drafting the 2011 report. It has not been edited by the team. The views and opinions expressed in this paper are those of the author(s) and should not be attributed to the EFA Global Monitoring Report or to UNESCO. The papers can be cited with the following reference: Paper commissioned for the EFA Global Monitoring Report 2011, The hidden crisis: Armed conflict and education. For further information, please contact

2 Monitoring the impact of the financial crisis on international aid Development Initiatives, May 2010 i 1

3 Contents 1. Introduction: What can we say about future aid to education? Changing aid budgets and prospects for education Projections for recipient countries Projections by donor Conclusion Donor responses to the financial crisis Bilateral Donors Multilateral Donors International Monetary Fund (IMF) World Bank Group (WBG) Regional Development Banks The European Commission (EC) General Capital Increases Future aid for Education and new sources of funding? Appendix

4 1. Introduction: What can we say about future aid to education? The reporting of aid is invariably backward looking. While considerable detail on how and where development assistance was spent is available, normally a minimum of one year after the event, comprehensive assessments of forward looking plans are conspicuously absent. This causes significant challenges for donor coordination, and more particularly, for partner planning. It also renders the assessment of future funding needs and gaps to an exercise in estimation. Given this dearth of detailed information on future sectoral spending, projections for education expenditures are largely dependent on the few sources of forward spending data on ODA levels made publically available. For the purposes of this analysis, such data has been reviewed in light of past trends in education assistance to project future levels of expenditure to the sector. There are two key sources for projections of future aid levels, each organising data in different ways. The first is the Organisation for Economic Cooperation and Development (OECD) annual Forward Spending Plan review, a useful vehicle for greater aid predictability. ii This gives 3 year forward spending projections of aggregate Country Programmable Aid (CPA) by developing country, based on feedback from DAC Bilateral and Multilateral donors (see below for elaboration on CPA). The current 2009 report, which projects levels of Total CPA for , has been used to estimate future levels of CPA to Basic Education for recipients, based on an assessment of past disbursements to the Basic Education sector as proportions of total CPA levels. Complementary data of future CPA disbursements by donor are not available. In its absence, a separate OECD exercise has been drawn upon. In April 2010, the OECD published projected 2010 levels of Total ODA (Net) for all DAC donors, one year ahead of when it would normally be otherwise reported. iii Again, projections are not disaggregated by sector (nor, in this case, by region or recipient). Analysis of past levels of Education ODA (CPA) as a proportion of Total ODA has therefore, been applied to these projections to estimate DAC donor CPA to Basic Education contributions for 2009 and iv Aid projections beyond this are not available. v Such methodologies are limited by some key assumptions, particularly around issues of reallocation outlined further below. However, each method generates comparable projections of future volumes of Basic Education assistance, with a shared conclusion. Future projections, however optimistic do not come close to meeting the current funding gaps that exist for many lower income countries to achieve the Education for All (EFA) goal by Minimal increases are expected for the period considered, with some recipient countries faring much worse than others. The following section outlines in more detail the methodologies used to project both what donors will disburse in terms of aid, and what recipients are projected to receive. This is followed by a more qualitative assessment of donor responses, bilateral and multilateral, to the financial crisis. Unless otherwise stated all figures are in US dollars and expressed in 2008 constant prices. 3

5 2. Changing aid budgets and prospects for education 2.1 Projections for recipient countries In May 2009, the OECD published a second in a series of forward spending projections giving 3 year forward projections expected for total levels of CPA. vi This gave projections levels for 2009 to 2011 for all developing countries. vii This is the only comprehensive projection of what recipients are expected to receive in terms of aid for upcoming years. The OECD is expected to publish the third in this series on Forward Spending projections in June viii There is a two year delay between delivery of aid and CPA reporting by OECD DAC members. Thus actual CPA aid levels for Basic Education in 2009, for example, will not be known until the beginning of Past information concerning CPA levels for Basic Education is available for 2004 to 2008; this information has been utilised to assist in future projections. The OECD report does not disaggregate total CPA projections by sector. As such this section considers the likely scenario for Education expenditure, per recipient country, based on the proportion of past allocations directed to the sector. Estimations are thus made for funding to Education CPA specifically for 2009 to 2011 and the expected levels of aid that can be expected for i) all developing countries, ii) lower income countries and iii) sub Saharan Africa. Box 1: Country programmable aid what is it? There has long been a debate over what can be classed as real or phantom aid. Country Programmable Aid (CPA) is a relatively new concept, introduced in 2007, which reflects the volume of resources transferred by the donor at partner country level. CPA is defined as being ODA that subtracts from gross ODA aid that is (i) unpredictable by nature, ix ii) entails no cross border flows, x iii) does not form part of co operation agreements between governments, xi iv) is not country programmable by the donor xii or v) is not susceptible for programming at country level. xiii CPA technically, therefore, is a more realistic measure of direct aid flows to recipient countries themselves for their development needs. It should be noted that CPA as a measurement is still far from perfect i.e. included in CPA calculations are contributions for technical cooperation which recipient country governments would argue is an inefficient use of scare donor resources and should not be counted as aid. Additionally, many would argue that the exclusion of humanitarian aid to form the CPA definition is not practical in the case of fragile states for whom humanitarian assistance forms a large part of aid. However, despite these valid criticisms, CPA does get closer to the core of what recipient governments receive in aid levels. xiv Education that is reported as ODA under the OECD is, for instance, inclusive of imputed student costs, the estimated costs of educating students from developing nations in donor countries. xv Under DAC rules, donors may choose whether to include these costs in their ODA levels or not. Most donor countries choose to include such costs. CPA going to the Education removes this component of aid so that the final value is more reflective of the inflows of financial resources going to the recipient country. 4

6 Methodology Disbursement data for CPA to Education and Total CPA are available for years 2004 to Projections for years 2009, 2010 and 2011 are made by considering the average proportion each recipient received for CPA to Basic Education as a percentage of Total CPA over this period. Between 2004 and 2008, on average, 6.2% of Total CPA to Sub Saharan African countries went to Basic Education; for lower income countries this proportion was 6.1% and for all developing countries this was 4.8%. xvi These average proportions, for each country within the respective country groupings, are applied to projected total CPA for Within each country group there are some recipients that have historically received a much greater share than the average; the majority of these countries are in sub Saharan Africa. Country detail is given in the Annex see Table A2.1. This methodology thus assumes that, in proportionate terms, there is no sectoral reallocation impacting the Education Sector over compared to previous years. Further, by using averages, it assumes that CPA proportions to education are relatively consistent year on year. At the aggregate level this assumption holds, with proportions deviating by only 0.5% and 1.1% for developing and low income countries respectively over the period. However, it does not capture more significant fluctuation at the country level, and fails to reflect trends such as increasing or decreasing proportions to education. A country by country assessment of this is beyond the scope of this paper. Finally, it must be recognised that OECD projections are less reliable beyond 2009 and recipients who are not priority countries for donors have less robust CPA projections for future years. xvii CPA Projections In summary, while global CPA is expected to increase in 2009 by some 3.7% ($3 billion), lower income countries will actually see a fall of 0.5%. Sub Saharan Africa is expected to particularly suffer, with falls of over $1 billion (3.7%). Levels are expected to recover in 2010, with continued, but slower growth in 2011 (see Figure 1a). The large decline in CPA levels for sub Saharan African countries in 2009 is mainly attributed to large CPA cuts for certain countries. Seven countries are projected a decline of over $100 million between 2008 and The Democratic Republic of Congo, Kenya, Nigeria and South Africa are the only sub Saharan Africa with sizeable increases. The worst impacts of the global financial crisis were during this period; however, the CPA projections made on the basis of returned donor questionnaires were made prior to most donors reassessing their national budgets in light of the crisis. Therefore, it is entirely possible that these CPA projections understate the cuts that took place, with many donors later announcing aid cuts. 5

7 Figure 1a: USD Millions (2008 prices), change in CPA from previous year Change in Total CPA levels from previous year Global Sub Saharan Africa Lower income countries Source: OECD (2009), 2009 DAC Report on Aid Predictability: Survey on Donors Forward Spending Plans Total CPA levels for these 3 groups from 2004 are shown in Figure 1b which, overall, show a positive increase in aid for all developing countries, sub Saharan Africa and lower income countries, across the period. Figure 1b: Total CPA levels past and projections, USD Millions (2008 constant prices) 100,000 80,000 60,000 40,000 20, All Developing Countries Sub Saharan Africa Lower income countries Source: CPA figures for years OECD Secretariat; CPA figures for years OECD (2009), 2009 DAC Report on Aid Predictability: Survey on Donors Forward Spending Plans Further detail for developing countries, lower income countries and sub Saharan Africa are given below, together with implications for basic education. 6

8 All Developing Countries Total CPA levels are expected to rise for many developing countries between 2008 and 2009, constituting a $3,020 million increase in aggregate. Although future CPA levels are expected to improve further in 2010 and 2011, it is important to note that many countries are still expected to see a decrease over 2008 levels almost two fifths (58) of all developing countries by xviii See Table 1. Table 1: Change in Total CPA levels over Number of Countries experiencing a decrease Difference for Total CPA for all developing countries +$3,020 million +$7,540 million +$9,868 million Source: OECD (2009), 2009 DAC Report on Aid Predictability: Survey on Donors Forward Spending Plans Based on averaged proportions, CPA for Education for all developing countries is projected to see a slight decrease between , falling by around $90 million, or 2.2%. This is despite an increase in Total CPA levels over this period. This is because the average proportion of CPA going to Basic Education (4.8%) used to project future Education aid levels is slightly lower than that in 2008 (5.1%) see Annex Table A2.1. xix CPA levels for Education are expected to recover in 2010 and 2011 rising to $4,250 million and $4,362 million respectively see Figure 2. Consequently, CPA to Basic Education between 2009 and 2010 is projected to grow by 5.4%. This is more in line with historical increases, although there is a degree of volatility. Over the period, for example, annual increases ranged between 4.5% and 9.2%. xx In 2011, however, growth rates are projected to halve to 2.6%, significantly lower than previous years. If using the 2008 proportion of Total CPA going to Basic Education (5.1%), levels of CPA going to Basic Education are projected to increase year on year (see Figure 2a). However, in using the averaged proportion across the period (4.8%), projections are projected to decrease in 2009, before rising in 2010 and Between 2004 and 2008, proportions of total CPA going to Basic Education have been growing year on year. Between 4.6% and 5.1% of Total CPA has gone to Basic Education for all developing countries. On average this has meant that 4.8% of Total CPA has gone to Basic Education. This was lower than the 2008 proportion which stood at 5.1% (see Figure 2b). 7

9 Figure 2a: 4,800 USD Millions (2008 prices) 4,600 4,400 4,200 4,000 3,800 Projections to Basic Education for all developing countries 4,625 4,507 4,362 4,277 4,250 4,123 4,033 3, All developing countries (average proportion) All developing countries (2008 proportion) Figure 2b: % of Total CPA going to Basic Education 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% % of Total CPA going to Basic Education for all developing countries 4.6% 4.7% 4.8% 4.9% 5.1% 4.8% Average 8

10 Low income countries More than half of all low income countries are expected to experience a decrease of Total CPA between 2008 and 2009 $203 million in aggregate. Although future CPA levels are expected to improve beyond 2009, a large number of countries are still expected to see decreases compared to 2008 levels (28 countries by 2010 and 24 countries by 2011) see Table 2. Eighteen lower income countries are projected to see absolute cuts in total CPA for all 3 years. Aggregate CPA increases in 2010 and 2011 for the low income country group are mainly attributed Angola, Cambodia, Democratic Republic of Congo, Kenya, Nigeria, Sudan, Tanzania, Uganda and Vietnam. Table 2: Change in Total CPA levels from Number of Countries experiencing a decrease Difference for Total CPA for all lower income countries $203 million +$1,908 million +$2,655 million Source: OECD (2009), 2009 DAC Report on Aid Predictability: Survey on Donors Forward Spending Plans Despite falls in total CPA over , CPA to basic education is projected to grow by 5.1% ($115 million) to $2,390 million. This is because the average proportion of CPA going to Basic Education (6.1%) used to project future Education aid levels is slightly higher than that in 2008 (5.5%). xxi Such growth partly counters the 11.2% fall in CPA for Basic Education between 2007 and saw a peak in CPA to Basic Education rising by 21.9% from 2006 CPA levels. xxii Following a further 5.8% increase in 2010, levels are projected to flat line between 2010 and 2011 at $2,528 million and $2,562 million respectively (see Figure 3a). If using the 2008 proportion of CPA going to Basic Education (the lowest of the period), projections are projected to be much lower, declining in 2009 before recovering in 2010 and The proportions of Total CPA going to Basic Education remained the same for period standing at 6.1%. In 2007, this increased to 6.6% before falling to 5.5% in The average proportion of CPA going to Basic Education for the period considered was 6.1% which was higher than the 2008 proportion (5.5%) which was the lowest for the entire period considered (see Figure 3b). 9

11 Figure 3a: 2,600 USD Millions (2008 prices) 2,500 2,400 2,300 2,200 2,100 2,000 Projections to Basic Education for low income countries 2,562 2,528 2,390 2,351 2,324 2,275 2,186 1, Lower income countries (average proportion) Lower income countries (2008 proportion) Figure 3b: % of Total CPA going to Basic Education 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% % of Total CPA going to Basic Education for low income countries 6.6% 6.1% 6.1% 6.1% 6.1% 5.5% Average 10

12 Sub Saharan Africa More than half of all sub Saharan African countries are expected to experience a decrease of Total CPA between 2008 and 2009, with cuts of $1,030 million in aggregate. Although future CPA levels are expected to improve beyond 2009, a large number of countries are still projected to see decreases in their CPA projections as compared to 2008 (19 countries by 2010 and 16 countries by 2011) see Table 3. Fifteen sub Saharan African countries are projected to see substantial cuts in their projected levels in total CPA for all 3 years. xxiii Although CPA levels are projected to see a decrease overall, large increases in total CPA levels between 2008 and 2009 are expected for the Democratic Republic of Congo, Kenya, Nigeria and South Africa. Growth in 2010 and 2011 are mainly attributed to Angola, Democratic Republic of Congo, Kenya, Nigeria, South Africa, Tanzania and Uganda. Table 3: Change in Total CPA levels from Number of Countries experiencing a decrease Difference for Total CPA for all sub Saharan African countries $1,030 million +$1,231 million +$2,608 million Source: OECD (2009), 2009 DAC Report on Aid Predictability: Survey on Donors Forward Spending Plans Based on past averaged proportions, 2009 will see practically no growth in CPA for basic education, rising by 1.4% to $1,581 million. Twenty two sub Saharan Africa countries are projected to see a decrease in CPA to Basic Education between 2008 and The $22 million increase over can be attributed to a select number of sub Saharan African countries for whom Total CPA levels are also expected to increase. If, for instance, Tanzania and Nigeria were excluded from the analysis, sub Saharan Africa would see a decrease of 4.4% ($63 million) in CPA levels to Basic Education between 2008 and xxiv The small projected 1.4% rise in 2009 for SSA in aggregate counters the 5.8% fall in CPA disbursements for Basic Education between 2007 and saw a peak in CPA to Basic Education rising by 15.5% from 2006 CPA levels. xxv 2010 and 2011 are projected to see levels rise to $1,719 and$ 1,798 million respectively. These represent growth rates of 8.8% and 4.6% respectively, considerably lower than the 10 15% annual growth rates experienced between 2004 and If using the 2008 proportion of Total CPA going to Basic Education (the lowest of the period) then projections for are lower (see Figure 4a). The proportions of Total CPA going to Basic Education have fluctuated across the years, ranging between 5.7% and 6.7%. The average proportion of CPA going to Basic Education for the period considered was 6.2% which was higher than the 2008 proportion (5.7%) which was the lowest for the entire period considered (see Figure 4b). 11

13 Figure 4a: Projections to Basic Education for sub Saharan Africa USD Millions (2008 prices) 2,000 1,800 1,600 1,400 1,200 1, Figure 4b: % of Total CPA going to Basic Education 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 1,798 1,719 1,652 1,558 1,581 1,587 1, SSA (average proportion) SSA (2008 proportion) % of Total CPA going to Basic Education for sub Saharan Africa 6.7% 6.4% 6.5% 6.0% 6.2% 5.7% Average 12

14 Liberia Liberia is expected to experience significant cuts in aid. Absolute volumes of country programmable aid are expected to fall some 43% between 2008 and 2011, decreasing from $586 million to $333 million in 2011 (2008 constant prices). Because of increases projected in 2011, cuts over are even higher at 47%. Liberia is a highly aid dependent country ODA (excluding debt relief) as a proportion of Gross National Income (GNI) was 108%. CPA levels as a proportion of GNI was 107%. It is projected to fall to 49% in 2010 and 48% in The impact will obviously have implications for sustained expenditure on Education. However, the Basic Education Sector has received very low proportions of total CPA expenditure across the period, never rising above 4% (5% for Total Education). Nevertheless, disbursements to Basic Education will fall below 2008 levels. Based on the average share that Basic Education CPA has received across as a proportion of total CPA, CPA disbursements to Basic Education will fall to $5 million annually for years , a third of the $15 million disbursed in Even when considering a more optimistic scenario which assumes that CPA disbursements to Basic Education will retain the maximum proportion that Basic Education received in any year during then levels of expenditure of expenditure, in real terms, would still be lower than that of 2008, reaching $14 million by These cuts are, in most part, attributed to the large cuts in total CPA levels between ; this in turn led to lower projected CPA levels for Basic Education. Proportions of Total CPA for Basic Education have, also been decreasing since 2004, only making a recovery in This has also meant that the average share that Basic Education CPA received across was lower than the 2008 share (2.5% versus 1.6%). See Tables below. Actual Projection Total CPA Total Basic Education Average % of CPA to Basic Education 4.1% 2.9% 1.0% 0.4% 2.5% 1.6% USD Millions (2008 constant prices) Basic Education (Average) Basic Education (Maximum) 13

15 Burkina Faso Absolute volumes of total country programmable aid going to Burkina Faso, where basic education is an important component of development assistance, are expected to fall significantly between 2008 and Total CPA levels will see consistently decreasing levels, falling by $241 million between , or 26% across the period. The proportion of CPA going to Basic Education for Burkina Faso is relatively high, ranging between 7% to 11% across the period, with Total Education as high as 14%. Projected cuts in CPA will therefore have significant consequences for the sector. Based on the average share that Basic Education CPA has received across as a proportion of total CPA, projections indicate that CPA disbursements to the sector will fall by a third, from $94 million in 2008 to $63 million by Even when considering a more optimistic scenario which assumes that CPA disbursements to Basic Education will retain the maximum proportion that Basic Education received in any year during levels of expenditure, in real terms, would still fall to $74 million in 2011 a significant cut in absolute and proportionate terms. These cuts are, in most part, attributed to the large cuts in total CPA levels between ; this in turn led to lower projected CPA levels for Basic Education. A large proportion of CPA goes to Burkina Faso as compared to other developing countries. However, these proportions have fluctuated over the period. In 2008 the proportion of CPA going to Basic Education was 10.1%. the second highest of the period considered. However, the average ratio was 9.3%. See Tables below. Actual Projection Total CPA Total Basic Education Average % of CPA to Basic Education 8.6% 6.5% 11.0% 9.6% 10.1% 9.3% USD Millions (2008 constant prices) Basic Education (Average) Basic Education (Meximum) 14

16 2.2 Projections by donor In April 2010, the OECD published projections of DAC donor ODA for This is the first ever comprehensive OECD assessment of pipeline ODA, based on a review of donors budget plans in order to assess the extent to which Gleneagles and Millenium+5 commitments, due in 2010, will be met. xxvi These projections are for total ODA and are not disaggregated by region or sector. This is the only comprehensive source of forward spending plans by donor. Comparable data for the education sector, either at global or regional levels, is not available. In 2009 preliminary figures indicate that global ODA increased by $716 million from $121.5 billion to $122.2 billion (a 0.6% increase). Excluding debt relief, aid increased by 6.8% from $112.5 billion to $120.2 (0.31% of DAC member GNI). This was the third largest increase since In 2010, global assistance is expected to increase by an additional $6.3 billion to $128.5 billion, an increase of 5.1% over 2009 levels. xxvii However, debt relief is expected to be significantly higher in Assuming that approximately 5% of 2010 assistance will be bilateral debt relief, aid, excluding debt relief ODA is estimated to increase by only 1.5% over 2009 to $122.1 billion. ODA and CPA trends are comparable. Both Total CPA projections for 2009 and preliminary Total ODA projections undertaken by the OECD are done on the basis of questionnaires which DAC donors are required to complete. Total ODA Net excluding Debt Relief in 2009 was $120 million for all developing countries compared to CPA of $84 million (or 70% of Total ODA Net). Similarly for 2010 projections Total ODA Net is $122 million, with CPA levels at $88 million (or 72% of Total ODA Net). There have been broadly similar trends in the growth of Total ODA Net and total CPA levels since 2004 which is the earliest year which data on CPA exists. xxviii Figure 5: 140 USD Billions (2008 constant prices) Global aid flows (est.) Total ODA Excluding Debt Relief Debt Relief Total Given the significance of 2010 and the fruition of the Gleneagles commitments, this increase, even when considering debt relief, is not substantial saw the greatest increase, with levels of ODA rising by 11.4% over 2007 levels. The majority of the increase between 2009 and 2010 is attributed to the large increases in Global ODA that the United Kingdom and Germany are expected to disburse. Conversely Ireland, Japan, Norway, Spain, and Sweden are expected to decrease their total 15

17 ODA Net levels between 2009 and xxix See Table A2.5 in Annex for more detail and Section 3 below. Methodology In the absence of direct projections for aid to education, the following section considers the likely scenario for CPA Education expenditure by DAC donor based on past allocation proportions to the sector as a percentage of Total ODA Net. Applied to 2010 aid projections, the section provides rough estimations for how changing aid flows, by donor, impact Education CPA specifically for 2010 for i) all developing countries, ii) lower income countries and iii) sub Saharan Africa. This methodology is based on some significant assumptions: It assumes that, in response to the crisis, donors do not sectorally reallocate assistance, i.e. proportions of aid directed to basic education remain broadly similar to recent historical levels. xxx In the regional and group assessments (sub Saharan Africa, lower income countries) it also assumes that there is no regional reallocation of aid. Aid projections reflect global levels only, thus past patterns must be used for aggregate assessments. The use of average proportions disbursed to Basic Education fail to capture increasing or decreasing trends of assistance to the sector. However, that proportional increases by any donor will continue is a large assumption in itself. There is no clear indication from past trends that proportions are gradually increasing for any of the DAC donors. Disbursement data by donor for CPA to Education is available for years 2004 and Projections for years 2009 and 2010 were made by considering the average proportion each DAC donor disbursed for CPA to Education as a percentage of Total ODA Net. Between 2004 and 2008, on average DAC donors directed 3.2% of their Total ODA Net to CPA for Basic Education to developing countries; for lower income countries this was 1.9% of all assistance was directed to CPA Basic Education in lower income countries, and 1.3% in sub Saharan Africa. xxxi Average proportions, for each DAC donor, were used to estimate what proportion of Total ODA Net in 2009 and 2010 would be directed to Basic Education xxxii. Within the DAC group there were some donors who dedicated a much greater share than the DAC average above. Projections by individual donors are given in the Annex Table A Global all developing countries Based on averages of past proportions of assistance going to Basic Education, total development assistance from DAC donors xxxiii to the sector is projected to decrease in 2009, falling from $4.1 billion in 2008 to $3.9 billion in This is attributed to the proportion of Total ODA Net going to CPA for Basic Education being lower in 2009 (3.20%) than was the case in 2008 (3.35%) and Total ODA Net levels not changing significantly over 2008 and Levels are expected to recover in 2010 rising to $4.2 billion the highest since 2004 However, the projected fall in 2009 is worrying as it impedes sustainability of investment in Basic Education programmes with stops and starts in funding. Amongst donors expected to cut Total ODA in 2010, a number, such as Japan, Spain and the United States are amongst the highest funders of CPA to Education by volume. xxxiv 11 donors in total are projected to decrease their CPA to Basic Education between 2008 and 2010 xxxv. Conversely, increases 16

18 in global aid from the United Kingdom, another key contributor to basic education, is projected to translate into increases of $374 million between 2008 and 2010 for the sector. Similarly Belgium and Norway are projected to increase aid levels by $36 million and $45 million respectively. CPA for Basic Education as a proportion of Total ODA Net has fluctuated over the period from a high of 3.60% in 2007, to a low of 2.77% in The average proportion of 3.20%, used for the 2009 and 2010 projections, is lower than the 2008 proportion (3.35%). Had the 2008 proportion been used the CPA projections would have been slightly higher. xxxvi Figure 6a: 4,500 USD Millions (2008 constant prices) 4,000 3,500 3,000 2,500 2,000 1,500 1, CPA Basic Education Disbursements to All Developing Countries and projections for 2009 and ,119 3,415 3,286 3, ,073 3,927 4,155 Figure 6b: % of Total ODA net going to Basic Education for low income countries ( ) % of Total ODA Net going to Basic Education 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 3.31% 2.77% 3.04% 3.60% 3.35% 3.20% 0.0% Average 17

19 Lower income countries Based on averages of past proportions of assistance going to Basic Education in lower income countries, development assistance from DAC donors xxxvii for Basic Education to this group of countries is projected to only marginally increase, rising from $2.25 billion in 2008 to $2.44 billion in This is lower than levels in Seven DAC donors are projected to decrease their levels of ODA funding to Basic Education for Lower Income countries xxxviii over The United Kingdom is responsible for the majority of the increase between 2008 and 2010 $179 million of the $194 million net increase. Norway and Belgium are also projected to increase Education CPA by $32 million and $27 million respectively. CPA for Basic Education as a proportion of Total ODA Net has fluctuated over the period from a high of 2.34% in 2007, to a low of 1.57% in The average proportion of 1.88%, used for the 2009 and 2010 projections, is higher than the 2008 proportion (1.85%). Had the 2008 proportion been used the CPA projections would have been slightly lower. xxxix Figure 7a: USD Millions (2008 constant prices) 3,000 2,500 2,000 1,500 1, CPA Basic Education Disbursements to Lower Income Countries and projections for 2009 and ,849 1,942 2,070 2,525 2,250 2,308 2, Figure 7b: % of Total ODA net going to Basic Education for low income countries ( ) % of Total ODA Net going to Basic Education 3% 2% 2% 1% 1% 0% 1.96% 1.57% 1.76% 2.34% 1.85% 1.88% Average 18

20 Sub Saharan Africa Projections of development assistance from DAC donors xl for Basic Education in sub Saharan African countries is also projected to rise only marginally, from $1.54 billion in 2008 to $1.65 billion in Between 2005 and 2007 DAC donors could be credited for making efforts to increase the level of funding to Education. However, projections indicate that future years will see comparatively lower rates of growth, with levels never quite matching those of Nine DAC donors are expected to decrease their levels of ODA funding to Basic Education for sub Saharan African countries. xli. The United Kingdom is responsible for the majority of the increase. It is projected that between 2008 and 2010 it will increase its ODA funding to Basic Education by $141 million. Projections for Belgium and Norway also indicate a $21 million and $22 million increase respectively. CPA for Basic Education as a proportion of Total ODA Net has fluctuated over the period from a high of 1.51% in 2007, to a low of 1.00% in The average proportion of 1.27%, used for the 2009 and 2010 projections, is higher the same as the 2008 proportion. Figure 8a: USD Millions (2008 constant prices) 2,000 1,800 1,600 1,400 1,200 1, Basic Funding Disbursements to sub Saharan Africa Countries and projections for 2009 and ,388 1,236 1,394 1, ,542 1,559 1,653 Figure 8b: % of Total ODA net going to Basic Education sub Saharan African countries ( ) 1.6% 1.47% 1.51% 1.4% 1.27% 1.27% 1.18% 1.2% 1.00% 1.0% % of Total ODA Net going to Basic Education 0.8% 0.6% 0.4% 0.2% 0.0% Average 19

21 United Kingdom A traditionally strong donor for Basic Education whose levels of aid to Education is projected to increase but still failing to reach historically high levels achieved in 2007 The UK is consistently one of the largest contributors to basic education financing, both globally, and for lower income countries (as well as for sub Saharan Africa). Proportions of Total ODA disbursed to the sector are also substantially higher than DAC donor averages (see Annex Table A ) preliminary Total ODA Net disbursements for the UK reached $13,179 million, with 2010 levels expected to increase to $15,557 million 35% above 2008 levels. xlii As such CPA going to Basic Education is expected to accompany this increase. See graph below. All Developing countries: For DAC countries as a whole, CPA for all developing countries going to Basic Education is projected to only increase by $82 million between 2008 and The UK contribution is ensuring that CPA for all developing countries increases in real terms as many individual countries are projected to decrease their levels of CPA to Basic Education over this period. If one were to exclude the United Kingdom from analysis, CPA to all developing countries for Basic Education is projected to actually decline by $293 million in real terms between 2008 and The UK s increase is projected to be $374 million between 2008 and Lower income countries: For DAC countries as a whole, CPA for lower income countries going to Basic Education is projected to only increase by $194 million between 2008 and The UK is projected to be responsible for 93% of that increase with projected increases to CPA for Basic Education amounting to $179 million over the period. Sub Saharan Africa countries: For DAC countries as a whole, CPA for sub Saharan African countries going to Basic Education is projected to only increase by $111 million between 2008 and The UK is ensuring that CPA for sub Saharan African countries increases in real terms as many individual countries are projected to decrease their levels of CPA to Basic Education to sub Saharan Africa between 2008 and The UK s increase is projected to be $141 million between 2008 and Removing the United Kingdom from analysis, CPA to sub Saharan African countries for Basic Education would actually decline by $29 million in real terms. The graph below also presents the optimistic projection which projects the UK s contribution to Education CPA for 2009 and 2010 using the highest proportionate share that Basic Education received over the period; for purposes of consistency, however, the average proportionate share is used for actual projections. Despite the UK s efforts to prioritise Basic Education in resource poor countries it must be noted that 2008 actually saw substantial declines in disbursements going to CPA for Basic Education, reversing an otherwise upward trend since Whilst UK CPA levels for Basic Education are projected to recover in 2010, it will still be trying to catch up its peak levels of The UK s Education Strategy Learning for All: DFID s Education Strategy projects that in 2010/11 1 billion will be spent per annum through to 2015/16 in order to stay on track to meet a cumulative ten year target of 8.5 billion. xliii Half of the 1 billion spend in 2010 will go to Africa to support 8 million school children. Of this 1 billion 57% (or 571 million) will be delivered through Bilateral Programmes of which around 70% will go to Basic Education. xliv These figures are obviously inclusive of items that do not appear under CPA so direct comparison with projections is problematic. However, the UK is one of the few countries that has provided some sort of indication as to what future expenditure on Education expenditure will be and where it will take place. Furthermore, the EFA FTI Financial Report for 2009 indicates that the UK has pledged $96 million over the /13 period. USD Millions (2008 constant prices) 1,200 1, , All Developing Countries Optimistic projection Sub Saharan Africa Optimistic projection Low income countries Optimistic projection

22 The Netherlands A traditionally strong donor for Basic Education whose levels of aid to Education are projected to decline The Netherlands has traditionally been a key donor for Basic Education, providing both resources and the political leadership through its strong support of the Fast Track Initiative. Like the UK, proportions of total ODA directed to the sector are among the highest of all DAC donors (see Annex Table A ), with total levels averaging 5.2% over In 2009 preliminary ODA disbursements for the Netherlands fell by over $300 million from $6,993 million to $6,675 million levels are projected to recover slightly to $6,724 million, but still 4% below 2008 levels. xlv Assuming CPA going to Basic Education takes its proportionate share of this fall, volumes will decline here also. See graph below. All Developing countries: For DAC countries as a whole, CPA for all developing countries going to Basic Education is projected to increase by $82 million between 2008 and The Netherlands, however, is projected to decrease its levels of CPA to Basic Education by $78 million. Even the most optimistic projections expect a decrease in real terms of $15 million. Lower income countries: For DAC countries as a whole, CPA for lower income countries going to Basic Education is projected to increase by $194 million between 2008 and The Netherlands, however, is expected to decrease levels of CPA to Basic Education to lower income countries by $58 million. Again, even the most optimistic projections expect a decrease in real terms of $17 million. Sub Saharan African countries: For DAC countries as a whole, CPA for sub Saharan African countries going to Basic Education is projected to increase by $111 million between 2008 and The Netherlands, however, is projected to decrease its levels of CPA to Basic Education by $43 million. Even if the most optimistic projection is taken there is expected to be a decrease in real terms of $12 million xlvi The graph below also presents the optimistic projection which projects the Netherlands contribution to Education CPA for 2009 and 2010 by using the highest proportionate share that Basic Education received over the period; for purposes of consistency, however, the average proportionate share is what is used as actual projections. USD Millions (2008 constant prices) All Developing Countries Optimistic projection Sub Saharan Africa Optimistic projection Low income countries Optimistic projection

23 2.3 Conclusion Both methodologies considered (i.e. from recipient and donor perspectives) predict similar levels of CPA aid going to Basic Education for lower income countries, sub Saharan African countries and all developing countries. In summary, levels of CPA for Basic Education in the near term are projected to change only marginally over 2008 volumes. The projections have been based on averaged historical shares that Basic Education has received as a proportion of total CPA for For 2009, CPA going to Basic Education to lower income countries is expected to increase by 2.6% 5.1% in 2008 to between $2,308 and $2,390 million; xlvii for sub Saharan Africa it is expected to increase marginally by 1.1% 1.4% to between $1,559 and $1,581 million. xlviii By contrast, total CPA going to Basic Education for all developing countries is projected to decrease by between 2.2% 3.6% and is projected to be between $3,927 to $4,033 million in xlix Small increases across all groups of countries are expected in 2010 that compensate the lower levels of Lower income countries are projected an increase of 5.8% 5.9% to between $2,444 and $2,528 million. Sub Saharan Africa is projected to increase by 6.1% 8.8% to between $1,653 to $1,719 million. Total CPA going to Basic Education for all developing countries is projected to increase by 5.4% 5.8%, to levels above that of 2008 to reach between $4,155 and $4,250 million. Estimations for 2011 are only available from CPA projections for recipient countries. These suggest that CPA projections going to Basic Education will increase to $2,562 million for lower income countries; a marginal 1.3% increase compared to 2010 levels. Sub Saharan Africa is projected to see an increase with projections at $1,798 million; a 4.6% increase. Total CPA going to Basic Education for all developing countries is projected to increase by just 2.6% between 2010 and 2011 with projections set at $4,362 million. These projected increases fall far short of the required funding necessary for investment in achieving the Education For All (EFA) goal by Currently an average funding gap of $17,059 million exists for low income countries l in attaining the necessary outcome by 2015; for sub Saharan Africa this is $11,259 million (2008 prices). When taking into account the projected domestic funding resources UNESCO to input the projected increases in resources going to Basic Education will not be enough to put many developing countries back on track to attaining the EFA goal. 22

24 3. Donor responses to the financial crisis The global financial and economic crisis is estimated to have reduced the government budget revenues of low income countries by $52 billion in 2009 and $12 billion in 2010 as compared to 2008 levels. Half of all low income countries surveyed will see budget revenues stay below 2008 levels. Demands on social assistance programmes, however, are rising; just maintaining core public spending on education, health and infrastructure gaps required an estimated $200 billion in 2009 for all developing countries. li Much of the action to mitigate these funding gaps will, therefore, depend on external financial resources. However, according to the most recent World Bank Annual Report, tight borrowing conditions and uncertainty about the future in the wake of the financial crisis has abruptly curtailed the flow of capital that developing countries had been receiving for several years. The World Bank Report estimates that this will result in a financing gap for developing countries of between $352 billion and $635 billion in This may, in the absence of other forms of external finance, result in many countries cutting spending on health, education, agriculture, and social programs. The report goes on to note that fragile and conflict affected countries are in a weaker position to cope with the effects of the crisis than other developing countries. lii One possible area of concern is the effect of the donor responses on the debt burden of developing countries. Much of the multilateral responses that have been announced will arrive in the form of new lending and there is evidence of at least some bilateral donors placing an increased emphasis on delivering ODA via loans rather than grants. France, for example, which provided 93% of its ODA as grants in However in 2009 this proportion had fallen to 83%. This is due to the fact that France has restarted lending programmes to a number of developing countries, including HIPCs. liii The increased emphasis on lending will inevitably worsen the debt position of the countries concerned, at least in the short run. These projections have been made in the wake of the global economic crisis, the effects of which are yet to completely filter through to donor budgets. This section considers the response of bilateral donors and multilateral agencies to the crisis to date. Bilateral action in direct response to the crisis is challenging to identify. OECD projections for 2010 DAC donor ODA offer an initial indication of the impact of the crisis on development budgets. Action is also summarised by considering budgetary statements on aid volumes and policy responses such as the comprehensive assessments of current assistance, reallocation of resources to the most vulnerable countries and sectors, and development and support of new initiatives. An assessment of multilateral responses and initiatives include the IMF, World Bank, regional development banks and the EC. 3.1 Bilateral Donors The most visible response of bilateral donors to the crisis has been through G8 and G20 summits seeking to harness multilateral responses. By comparison, it can be argued that many bilateral donors have been slower to consider their own bilateral assistance. Compared to multilateral initiatives individual donor responses are harder to assess. Caution must also be taken to distinguish between new and previously announced initiatives from which resources have been diverted. 23

25 Based on donor policy statements it is clear that donors have reacted through their country programmes in diverse and diverging ways. There has been no overarching pattern across bilateral donors, and action has no doubt been guided by modalities and areas favoured by individual countries. Some bilateral donors have (in most cases temporarily) cut aid, while a few have reconfirmed previous budgetary commitments. Other countries have responded by reprogramming aid across sectors (a number supporting increased social and infrastructural spending) and countries. A number have also redirected additional resources multilaterally towards international initiatives. Changing aid volumes Global development assistance in 2009 increased by only 0.6% over 2008 liv. Increases rose to 6.8% once debt relief is excluded. Excluding both debt relief and humanitarian assistance, bilateral aid rose by 8.5%, reflecting a scaling up of core development programmes. However, increased lending accounted for much of this rise, which grew by more than 20% over Excluding debt relief, 7 donors cut aid over 2008 levels. lv At least three of these were explicitly announced as a consequence of the financial crisis. Both Greece and Ireland announced budgetary constraints in 2009 with Greece deferring its EU 2010 commitment to 2012, and Ireland announcing cuts of 24% ( 224 million). Excluding debt relief, Greece and Ireland cut aid by 12.0% and 20.7% respectively. More importantly, aid as a proportion of GNI also fell for these countries (0.21% to 0.19% for Greece, 0.59% to 0.54% for Ireland), i.e. aid was cut at a greater rate than economic contraction. The Netherlands announced a freezing of its high ODA/GNI ratio in 2009 resulting in a projected 11% cut ( 600 million) as a result of falling GNI. Spending on education was particularly targeted for reduction, as were the water and sanitation sectors. Other areas singled out for a reduction in funding were recipient countries considered less vulnerable. Aid, excluding debt relief, finally fell by only 3.5%, with ODA/GNI ratios actually increasing from 0.79% to 0.81%. However, ODA to SSA fell by some 17.5% lvi, and volumes to education are not yet known. Italy also announced cuts in 2009, amounting to 56%. These were explained as in response to constraints to public expenditure, although direct links to the financial crisis have not been given. Excluding debt relief, aid fell by 21%, with ODA/GNI falling from 0.18% to 0.15%, the lowest of the G7 group. Canada, Greece, New Zealand and Portugal also saw falls in 2009 ODA, excluding debt relief. By contrast, Austria, Belgium, Finland, France, Norway, and the UK saw aid volumes grow by more than 10% (excluding debt relief), with France, UK and the US delivering the largest absolute increases. However, there has been concern of the rising use of loans as an aid modality, particularly in the context of falling commodity prices and trade revenues faced by many developing countries. France in particular saw its proportion of gross bilateral assistance delivered through loans jump from 24% to 41% in 2009, a more than doubling in volume terms. This poses a challenge in reconciling the increased demand for concessional lending against long term debt sustainability. 24