HE STATE of education in theworld is a silent emergency—over100 million primary school-agechildren are out of school, 150

million children in school are likely to dropout before completing primary school, morethan half of all girls in Africa never enroll inschool, and less than one-third of children inAfrica and South Asia can read and write.While CNN cameras will never capture achild dying from lack of education, every daychildren die from AIDS, malnutrition, andother conditions that might have been pre-vented had their mothers had a chance tocomplete a quality basic education.

When the global community establisheduniversal primary education as a MillenniumDevelopment Goal (MDG), and more than180 nations signed on to even broader goalsat the World Education Forum in Dakar in2000, it represented a clear political commit-ment to develop a global compact to achieve“Education for All.” While some have

defined the goal as primary education, con-stituting 5–6 years of schooling, we and agrowing number in the education field havedefined the challenge as quality universalbasic education—which calls for 8–9 years ofeducation. At the heart of this compact, asindicated in the Dakar Framework of Action,was an obligation for developing nations tocreate an education plan with adequatedomestic resources, political leadership, gov-ernance reforms, accountability, and trans-parency, as well as special initiatives to reachgirls and other vulnerable children, such aschildren with disabilities, refugees, orphans,and those impacted by HIV/AIDS. Thisprinciple of national ownership and com-mitment to reform was deemed essential notonly for any major expansion of qualitybasic education but also for convincingdonor nations that extra resources would beeffectively employed.

If the international community seriouslywants to achieve a global compact, the ques-

Finance & Development June 200538

Designing a Global Compact on Education

Designing a Global Compact on Education

TFree, qualityuniversal basiceducation isachievable

Gene Sperling and Rekha Balu

A math class in Nigeria.

tion is how the donor component can be structured to maxi-mize incentives for developing countries to both attempt andsucceed at ambitious expansions of free, quality universalbasic education. This article explores the elements of a suc-cessful compact: its precise structure, the guiding principles,and how to include the right incentives.

Critical ingredients of a compactInternational development discussions are often locked in animpoverished debate over whether money or reform is mostcritical to achieving universal basic education. The reality isthat both are essential, so the compact must be structured tospur reform and fund worthy plans. With this in mind, thefirst key ingredient is creating a reliable, long-term contin-gent commitment of resources. Contingent funding onlyreleases financing to countries after they have developed andinstituted the political reforms and resource allocations nec-essary to implement credible education plans. The prior andreliable nature of the commitments provides countries theassurance that if they fulfill their obligations and pursuereforms, donors will deliver promised funding. The contin-gent aspect assures donors that funds will only begin flowingwhen countries develop and implement quality educationplans. Such commitments are vital for several reasons.

• Ensuring that major expansions do not reduce quality.Without significant contingent commitments from donors,those countries that undertake a major expansion of accessto education can suffer serious declines in quality—thestudent-teacher ratio may zoom to 100:1 from 50:1 in ill-equipped classrooms. The heads of state in Uganda, Kenya,and Tanzania all made major commitments in recent years toabolish fees and saw enrollments skyrocket by millionsovernight. In Uganda, enrollment rose in 1996 from 3.4 mil-lion to 5.7 million students; in Kenya in 2003, from 5.9 mil-lion to 7.2 million students; and in Tanzania in 2002, from1.5 million to 3 million students.

While millions of poor children have clearly benefitedfrom the elimination of these financial barriers to schooling,such dramatic expansions without an equivalent boost inresources to compensate for lost fees and support theincreased numbers of students can create a quality dilemma.In Uganda, for example, while more students gained access,the explosion in class sizes—without more external assis-tance—caused a significant drop in the percentage of stu-dents receiving satisfactory scores in mathematics andEnglish. The answer to this dilemma is neither to forgo suchadmirable efforts to eliminate fees nor to discourage suchleaders from seizing critical political moments to push theirnations toward universal basic education. Instead, what isneeded is substantial contingent donor funding to encouragewell-planned expansions.

• Encouraging reforms with long-term funding for recurrentcosts. Dramatic expansions of primary school completioncan only be accomplished with a comparable expansion inthe number of teachers. Yet teacher salaries constitute thelargest component of an expansion—usually averaging over80 percent of education budgets in major developing

nations—and they are recurrent costs. As a result, countrieshesitate to hire the extra teachers necessary to expand qualityeducation because of both a lack of resources and a lack ofcertainty about the durability of those resources.

Even where significant donor funding is provided, theshort-term nature of such funding discourages countriesfrom proceeding with major teacher expansion. Manydonors, from the World Bank to the U.S. MillenniumChallenge Account, commit funding in three-year grantcycles. Yet, because it can take two to three years to simplyrecruit, train, and locate teachers in rural areas, developingnations often do not embark on major expansions becausethey fear that funds will be cut off just as they have finallydeployed teachers to critical areas. The Minister ofEducation of Rwanda told us there is even a name for this:“aid shock.” In addition to the constraint of three-year grantcycles, development assistance often will not help fundteacher salaries because it is a recurrent cost. The WorldBank awarded Kenya’s education system a $50 million,three-year grant in 2003—but the grant was focused onbuilding schools or buying textbooks and did not coverteachers’ salaries.

• Empowering reformers and creating positive competition.As the expansions in basic education call for major upfrontinvestments, but deliver returns only over a generation, large-scale education reform often loses out to an immediate crisisor tangible infrastructure project that a political leader cantake credit for during his term. Certain, contingent funding iscritical because it provides reformers within and outside ofgovernments with the leverage to push for difficult reformswith the confidence that these reforms will at least win exter-nal financial support. Furthermore, when a country sees itsneighbors winning resources after committing to specificuniversal education reforms, it begins a competition with itsneighbors to pursue equally ambitious and difficultreforms—as happened after debt relief was expanded in 2000.

The second key ingredient is getting donors on the samepage—that is, harmonizing expectations and standards andcoordinating funding. A credible global compact forcesdonors to establish a common set of standards for countries,which sends a clear message to countries about their obliga-tions. It ensures that countries do not waste time submittingmultiple applications and reports to donors. It ensures thatdonors are not duplicating projects or tripping over eachother to support narrow pet projects. And it encouragesdonor coordination at the country level to review plans andcoordination at the international level to decide which coun-tries receive priority funding.

Global fund or virtual fund?Donors and advocates over the past few years have debatedthe best structure for financing and coordination, revolvingaround two models: a global fund for education, or a “virtualfund” that coordinates donor financing.

A global fund for education, modeled on the Global Fundto Fight AIDS, Tuberculosis, and Malaria, would provide sev-eral unique benefits. It is easy to communicate—a global edu-

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cation fund would clearly focus donor and public attentionon universal basic education and the financing gap to achieveit. It offers a degree of independence and flexibility that bilat-eral funding may not have on its own, by creating a separategoverning structure. It promises a level of rigor and develop-ing country involvement through peer review of countries’funding proposals and national plans. Finally, it easily poolsresources, from both governments and private sector donors,who are not yet large-scale players in global education.

But such a fund, free of individual donor nations’ control,is a double-edged sword. The lack of control over the distrib-ution of funds can be a disincentive for serious resourcecommitments from major donors. Many advocates anddevelopment officials also are skeptical of the virtues ofbuilding extra bureaucracies or fear a long time lag for funddisbursals.

The virtual fund idea is to create a process for donors tocoordinate funding through existing bilateral and multilat-eral institutions without ceding control over developmentassistance to a new fund. This model responds to donors’ andadvocates’ concerns on multiple levels. It avoids creating anew bureaucracy with unnecessary overhead. It requires acommon set of benchmarks for countries’ plans.And it avoids duplication of projects through adonor review of plans at the country level that istriggered by countries’ proposals and realistic esti-mates of their financing gap.

But while a virtual fund may be a suitable com-promise for donors, it presents its own challenges.Donor control means that plan reviews are notindependent and donors’ interests, rather thancountries’ education policy needs, may influence fundingpriorities. In addition, the role of a virtual fund is simply dif-ficult to explain or communicate to the public and even todeveloping countries.

Following the Dakar forum, a couple of proposalsemerged for a global fund on education, including a pro-posal by one of the authors (Sperling, 2001). Yet the idea of aglobal fund received a cool reception not only from donorsbut also from developing countries and advocates who spokeof “fund fatigue” after the successful effort to establish thecurrent global health fund. At a high-level meeting of donorsand developing countries and nongovernmental organiza-tions (NGOs) in Amsterdam in early 2002, such resistanceled to a proposal for a virtual fund, which was adopted by theDevelopment Committee in April 2002. NGOs and develop-ing nations then successfully pushed the World Bank to “fast-track” a few countries for funding—leading to the name theFast Track Initiative (FTI).

Assessing the Fast Track InitiativeHas the FTI, still a work-in-progress, fulfilled the two keyrequirements for a global compact on education? On thecoordination and standards front, it has been successful in anumber of ways.

• The FTI is now an ongoing institutional structure, ledby the Group of Eight chair each year, which meets regularly

to review education plans at the international and countrylevels.

• Donor representatives jointly review a country’s plan,recommend to the FTI partnership whether the countryshould join the initiative, and coordinate on funding. InHonduras, for instance, Japan and Canada collaborated tofund additional teacher training and textbooks to help itachieve its Education for All plan.

• There has been a coordinated effort with UNESCO todevelop uniform benchmarks for what constitutes an accept-able Education for All plan. For example, the FTI benchmarkssuggest the allocation of 20 percent of national budgets toeducation, the elimination of school fees, a target of 40:1 stu-dent-teacher ratios, and repetition rates not above 10 percent.While these benchmarks are still being debated—there hasbeen some controversy about specifically limiting teachersalaries to a multiple of per capita GDP—the benchmarks atleast provide a framework for discussion and evaluation.

• Without the FTI as a coordinating mechanism therewould be no ongoing structure to even debate what is andis not working in the development of a global compact oneducation.

While the FTI has proved successful at disbursing funds tocountries, it has not come close to providing certain,contingent funding. On the positive side, France, theNetherlands, and the United Kingdom, together with severalother donors, have committed $348 million in 2005 to 12countries endorsed by the initiative—although there is still anannual financing gap of $289 million. To respond to countrieswithout existing donor sponsors, donors established a mini-global fund called the Catalytic Fund to support such donororphans with short-term, stop-gap funding. It is scheduled todisburse around $30 million this year to seven countries, witha goal of $292 million over three years.

On the negative side, these amounts comprise only a smalldown payment on what is needed to meet the universal basiceducation goal. The gap between what countries spend oneducation and what they need from donors ranges from$5.6 billion (to cover six years of education) to as much as$10 billion to cover the full eight to nine years needed for uni-versal basic education. Yet, collectively, donors give just$1.9 billion for education worldwide. Moreover, they havemostly funded smaller countries (such as Guinea and Niger),sometimes with a two-year lag. Stronger, quicker disbursal isnecessary to create positive incentives for others to embark onlarge-scale reform. In addition, of about 80 low-incomecountries that are off track for reaching the 2015 goal, only8 are currently covered by the FTI.

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“The commitment of aid needs to go beyondtwo- or three-year blocks of funding andinstead come in five- to ten-year cycles.”

But disappointment with the lack of sizable funding hasled to misplaced criticism of the FTI. It is critical to recog-nize that no structure could succeed on the contingent com-mitment side without significant resources from the headsof state and finance ministers of the major donor nations.Indeed, the multilateral FTI has been successful in setting upa structure and funding several countries in its first coupleof years—which compares quite favorably with a single-nation initiative like the U.S. Millennium ChallengeAccount, which took three years to sign its first disburse-ment agreement.

While the Netherlands is providing a major amount toeducation in terms of its national income, no head of state ina Group of Seven country has made the FTI, or even a com-pact on education, a high priority and taken leadership toencourage the donor community to provide the additional$7 billion to $10 billion to make universal basic education by2015 viable. Recently, however, key entities such as U.K.Prime Minister Tony Blair’s Commission on Africa, and theUN Millennium Project Task Force on Gender Equality andEducation issued reports calling for certain and predictablefunding through the FTI. The Africa Commission specifiedat least $7 billion to fund nine years of education in Africaalone, and U.K. Chancellor of the Exchequer Gordon Brownhas highlighted long-term funding for basic and secondaryeducation as a compelling argument for his InternationalFinance Facility proposal.

RecommendationsAfter missing the first of two MDGs on education—thatcountries achieve gender equity in schools by 2005—andwith a major expansion of large countries entering the FTI,the donor community faces a critical test in 2005, which itcould pass if it acts on the following three recommendations:

Donors should commit funds and work within the FastTrack Initiative. As the FTI is the only current global frame-work for coordinating and disbursing education assistance todeveloping countries, donors should prioritize FTI countriesand ensure that the FTI grows from a modest initiative into afully funded global compact. To the degree that criticism ofthe FTI exists, donors should seek reforms to strengthen andexpand its role as a global compact on education—not todismantle it or turn it into a pilot program.

We need a major increase in contingent funding in 2005to support 25 new countries entering the FTI. These Africanand Asian countries—representing at least 50 percent of theworld’s 104 million out-of-school children—are potentiallyeligible for funding. The World Bank has predicted that these25 additional countries and the existing 12 will requireat least $2.3 billion a year for just primary education—anestimate that looks rather low. The new group includesmajor African nations, such as Ethiopia, Senegal,Mozambique, and Kenya, as well as Pakistan, which alonecould require $400 million a year in external financing.Ethiopia, which has already been endorsed, projects a financ-ing gap of nearly $114 million this year with more than sev-eral million children out of school. Providing full support for

these large countries’ plans will not only help their childrenwho are missing an education but will also set a powerfulexample for others that strong Education for All plans andefforts at reform will be supported by donors. It is crucialthat the Group of Eight take leadership on providing contin-gent financial commitments, which over time need to reach$7 billion to $10 billion annually to achieve quality universalbasic education by 2015.

We need to commit to predictable, long-term financingfor recurrent costs. At this year’s High Level Forum on AidEffectiveness, donors took an important step forward byagreeing that aid should be stable, predictable, and arrivewhen promised. Donors should pledge predictable and ade-quate funding to close the education financing gap in devel-oping countries in time to meet the 2015 goal. Thecommitment of aid needs to go beyond two- or three-yearblocks of funding and instead come in five- to ten-yearcycles. Even if funding is initially given in three-year cycles,donors should be clear that funding could be renewed forsix- and nine-year horizons as long as developing nationsfulfill their commitments under their Education for All plan.Donors should also loosen their restrictions and provide forteacher salaries in countries that provide strong mechanismsand show efforts to bring down costs, but still struggle withspending the majority of their budget on recurrent expensessuch as teacher salaries. ■

Gene Sperling is Director and Rekha Balu is Associate Directorof the Council on Foreign Relations’ Center for UniversalEducation. Sperling was National Economic Adviser toPresident Clinton and head of the U.S. National EconomicCouncil in 1997–2001.

References:

Deininger, Klaus, 2003, “Does Cost of Schooling Affect Enrollment by

the Poor? Universal Primary Education in Uganda,” Economics of

Education Review, Vol. 22, No. 3 (June), pp. 291–305.

Fast Track Initiative Indicative Framework. Available at

http://www1.worldbank.org/education/efafti/harmonization.asp.

Fast Track Initiative Secretariat, 2004, “Fast Track Initiative Status

Report,” (November) (Washington).

Herz, Barbara, and Gene Sperling, 2004, “What Works in Girls’

Education: Evidence and Policies from the Developing World,”

(Washington: Council on Foreign Relations).

The Paris Declaration on Aid Effectiveness, 3 March 2005.

http://www1.worldbank.org/harmonization/Paris/

FINALPARISDECLARATION.pdf.

Sperling, Gene, 2001, “Toward Universal Education: Making a

Promise, and Keeping It,” Foreign Affairs (September/October), pp. 7–13.

United Nations Educational, Scientific, and Cultural Organization,

2005, “Education for All Global Monitoring Report, 2005” (Paris).

———, “Education for All Global Monitoring Report, 2002/2003”

(Paris).

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Uganda: The ‘Big Bang’ Approach,” Education Notes (Washington).

———, 2003, “Free Primary Education Support Project Appraisal

Document” (Washington).

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