metadata: authors: 0: author: Schwartz, Antoine
1: author: Stevenson, Gail
docna: 0: docna: Public expenditure reviews for education :
            the Bank's experience
docty: Policy Research Working Paper
subtopic: Public Sector Management and Reform,Public Sector Economics,Primary Education,Educational Sciences,Educational Institutions & Facilities,Effective Schools and Teachers,Public Financial Management,Public Finance Decentralization and
            Poverty Reduction
teratopic: Gender
abstracts: cdata!: Public expenditure reviews (PERs) are an
            excellent vehicle for analyzing important sector issues in
            the context of the overall economic and fiscal situation.
            PERs should give as accurate a picture as possible of how
            funds to the sector are allocated and disbursed.  The
            education sector (like other social sectors) has specific
            characteristics that affect the relationship between sector
            and macro expenditures that can skew the impact of
            "sector-neutral" policies.  PERs should pay
            explicit attention to these concerns, which include : a) the
            different time frames for the attainment of macroeconomic
            and education sector goals; b) the often substantial part of
            education sector spending that is outside the purview and
            control of the Ministry of Education; c) the low ratio of
            nonwage to wage expenditures within the sector's
            recurrent budget; and e) the large and capital-intensive
            foreign financing component of sector funding in many
            low-income countries, which is often fragmented among many
            donors and projects.  The treatment of the education sector
            in PERs must be analyzed in the broader context of Bank
            operations.  This report is the first step in a broader
            research agenda which includes : 1) analysis of effects of
            adjustment operations on the sector; and 2) development of
            guidelines for an improved analysis of sector-specific cost
            and financing issues in the macroeconomic expenditure context.
repnme: repnme: Public expenditure reviews for education :
            the Bank's experience
display_title: Public expenditure reviews for
            education : the Bank's experience
listing_relative_url: /research/1990/10/700153/public-expenditure-reviews-education-banks-experience
topicv3: Teachers Management m1326119 1523,Primary Education m1326139 480,Human Resources m1326304 1211,Public Finance Management m1326316 716,Education m1327048 470
publishtoextweb_dt: 2010-07-01T00:00:00Z
historic_topic: Gender
origu: Policy, Research & Ect Affairs
no_of_pages: 92
model_extractions: # **Policy, Research, and External Affairs**

# **Education and Employment**

WPS 510 This paper- a product of the Education and Employment Division, Population and Human Resources Department - is part of a larger effort in PRE to understand the education sector in the broader context of Bank operations, particularly adjustment programns, which form the background for public expenditure reviews (PERs) in two-thirds of the countries reviewed. It is the first step in a research agenda that includes analysis of how adjustment-related operationsaffecttheeducation sector, how theeducation sector should betreated in PERs inhecontextofadjustment, and how cost and financing issues should be treated in the context of the macrocconomy. Copies arc available frec from the World Banik, 1818 H Street NW, Washington DC 20433. Please contact Cynthia Cristobal, room S6-035, extension 33640 (81 pages with figures and tables).

Thc Bank's increased focus on policy-based lending lies behind the Bank's shift from traditional public investment revicws (PIRs, to identify sector or investmcnt priorities) and toward public expenditure reviews (PERs), which include recurrent expenditures. The shift to PERs has increased attention to the cost and financing of education, which is ovcrwhelmingly financed from the public sector's recurrent budget.

According to Schwartz and Stevenson: Cost and financing analysis (and format) in PERs should be more standardized so conclusions needn't be based on ad hoc international comparisons, and so the conclusions are more credible. Reports should focus morc on the sustainability of proposed, as well as achieved, reforms, and on the political and institutional (as well as cconomic) impediments to sustainability. Fcw reports acknowledge that more efficient educational processcs usually require investments in quality improvements, the added costs for which initially outweigh the resulting savings. And it should be made clear whether savings from cfficiency measures are to remain within the subsector or be reallocated elsewhere.

* PERs should include all sources of finaicingpublic and private, local and central government - in the assessment of the adequacy of sector funding.

* PERs should follow up sectoral diagnosis with concrete policy options, focusing not only on intrasectoral but also on intersectoral re-allocation of - resources. Maniy PERs particularly for resourcerich countries that spend a lot on education - fail to provide concrete options, perhaps feeling less necd than resource-poor countrics to improve the efficiency and equity of resource use.

- PERs are no substitutc for country and economic sector work. If data are inadequate, more sector work is needed for PERs to link macroeconomic and sectoral issucs. Single-sector or possibly social sector PERs are more appropriatc for in-depth analysis of cost and financing issues.

* Extensive detail is no substilute for f".used analysis of cducation issues and priorities in rclation to the country's overall deveiopment program.

* PERs should be attentive to the different time framiies needed to attain macroeconomic and educational goals; the often substantial education funds outsidc Lhc conLrol of Lhc Ministry of Education; the imbalance between, and low ratio of, capital to recurrent education spending; the low ratio of nonwage to wagc expenditures in the sector's recurrent budget; and the large, capital-intensivc foreign financing component of sector funding in many (especially low-income) countries, often fragmented among donors and projects.

* PERs should address the imbalance betwecn (1) recurrent and capital spending and (2) personnel and nonpersonnel spending.

Thc PRE Working Paper Series disseminates the fin(dings of work under way in **the** Bank's Policy, Research, and Extemal AffairsComplex An objective of the scrics is to get these findings **oul** quickly, even **if** presentations are less than fully x)lished. The findings, interpretations, and conclusions in these papers do not necessarily represent official Bank policy.

IProu(iiced bk the I'RE 1)issernination Center
# **CONTENTS**

|**Exec**|**utive Su**|**mumay**<br>**................................**<br>i|
|---|---|---|
|**L**|**INTR**|**ODUCTION**<br>**.**<br>**1**|
||A.|Background<br>.<br>1|
||B.<br>|Scope and Objectives.<br>2<br>|
||C.|Coverage .3|
||D.|Methodology .4|
|IL|EDUC|ATIONIN A MACROECONOMIC**CONTEXT .**<br>**...............**<br>6|
||A.|Linidng PERs and Bank-supported Adjustment Operations ....<br>..... 6|
||B.|Including Education in PERs .......................<br>6|
||<br>C.|<br>The Macroeconomic Context for PERs.<br>7|
||D.|Macroeconomic and Education Sector Links ...................<br>9|
||E.|Sector Issves and Priorities ...............................<br>12|
||F.|Overall Assessment ...........<br>..........................<br>16|
|**IL**|**SECT**|**OR COS1'S AND**FINANCING**............................**<br>18|
||**A.**|Budgetary Resource Allocation ............................<br>18|
||B.|Non-Central-Government Resources ........................<br>21|
||C.|The Intrasectoral Allocation of Budgetary Resources ....<br>........<br>27|
||<br>D.|<br>Management of Sector Resources ..........................<br>31|
|**IV.**|**SECT**|**OR**FINANCING**STRATEGIES ...........................**<br>35|
||**A.**|Overall Sector Financing ................................<br>35|
||B.|The Intrasectoral Allocation of Govermment Resources ....<br>...... 38|
||C.|Sector Resource Management .............................<br>39|
||D.|Overall Assessment ...........<br>.........................<br>39|
|V.|METI|HODOLOGY**.**<br>**.........................................**<br>41|
||**A.**|Sector Coverage ..............<br>.........................<br>41|
||B.|Coverage of Education Financing ..........................<br>42|
||<br>C.|<br>Education Finance Models ...............................<br>46|
||D.|Structural and Institutional Issues ..........................<br>46|
||E.|Overall Assessment ...........<br>.........................<br>52|
|VL|CONC|LUSIONS**AND**RECOMMENDATIONS**....................**<br>54|
# **ANNEXES**

|I:<br>II:|Questionnaire for Education Sector Treatment .......<br>............<br>List of Reports Reviewed .;.................................|57<br>64<br>|
|---|---|---|
|**III:**<br>|Country Typology .....<br>.......<br>....................<br>|67|
|**IV:**|Comparative Analysis of Sector Financing Strategies:<br>||
||Summary of Outcomes ............<br>......................|77|
|V:|<br>Sectors Considered in Reports ..........<br>.....................<br>**BOXES**|79|
|**Ll:**|Civil Service Wages and Public Spending on Education .....<br>......|..<br>22|
|IIL2:|<br>Public Spending on Education in Haiti and Tanzania ...............<br> <br>|25<br>|
|**_1113:_**|Calculating a Multiresource Budget for Education Spending ....<br>...|... 26|
|**11114:**|<br>Balancing Investment and Recurrent Spending: Recurrent/Capital<br>||
||Cost Ratios in Malawi and Rwanda .......<br>..................|34|
|V.1:|The Education Budget in Mali ...........<br>....................|45|
|V2:|The Budget Process in Colombia .........<br>....................|48|
|**V.3:**|Public Expenditure Planning in Botswana .......................<br>**TEXT TABLES**|49|
|**LI:**|Sector Resource Mobilization and Primary Enrollment Rate ....<br>.|..... 4|
|**111.1:**|Government Spending on Education ........<br>...................|19|
|1112:|Intrasectoral Allocation of Sector Resources .|28|
|**_I113:_**|Public Recurrent Expenditures per Student in Primary<br>||
||and Higher Education .............<br>......................|30|
|1N.1:|<br>Sector Financing Strategies: Public Resource Allocation .....<br>....|...<br>36|
|**IL1:**|**FIGURES**<br>Macroeconomic Analysis: Country Situation ......................|8|
|**IL2:**|<br>Threats to Sustainability of Education Sector Priorities .....<br>......|..<br>11|
|IL3:|<br>Sector Priorities: Primary vs. Postprimary Education .....<br>.........|.<br>13|
|1L4:|<br>Sector Priorities: Primary Education ..........................|14|
|**IL5:**|<br>Sector Priorities: Postprimary Education .......................|15|
|I1I:|<br>Coverage of Non-Central-Government Sources of Financing ....<br>...<br>|... 24<br>|
|IV.1:|Sector Financing Strategies ..................................|35|
|V.1:|<br>Implications of Proposed Sector Reforms Analyzed in Reports ....|.... 50|

Andrew Noss (consultant) provided extensive research and data analysis. Reviewers Nicholas Burnett (AF2PH), Martha de Melo (CECPE), Michael Mertaugh (EMlPH), Julian Schweitzer (EMTPH), Christopher Shaw (AFlPH), Jee-Peng Tan (ASlVP), Adriaan Verspoor (PHREE), and Manuel Zymelman (AFTED) made helpful comments cn an earlier draft.
# **EXvCUrWE** SUMMARY

# **A.** Introduction

i. Since the early 1980s, the Bank has been gradually shifting away from traditional public inves-ment reviews (PIRs), designed to identify sector investment priorities within the macro framework, to comprehensive public expenditure reviews (PERs) that include recurrent expenditures. The Bank's increasing focus on policy-based lending, particularly in low-income countries, has contributed io the growing reliance on comprehensive public expenditure reviews. Since education is largely financed from public sources, and overwhelmingly from the recurrent budget, the shift from PIR to PER naturally has increased attention to education cost and financing issues.

**ii.** Recent reviews have covered PERs in general and the treatment of the main economic sectors. Education issues in PERs, however, have not yet been evaluated. Specifically, this review has the following objectives: a) To assess the extent to which the increased attention to education in PERs contributes to a more integrated treatment of education sector issues within the overall economic environment, particularly in adjusting countries.

b) To compare the government's sector objectives with national expenditure priorities and policy reforms and, where they are inconsistent, to suggest improvements.

c) To review the diversity of methodological approach, data treatment, and sector coverage among education PERs, identifying best practices according to country-specific circumstances.

iii. The analysis relies on a structured review of 36 reports (see annex II) which were selected from a larger sample of PER and PIR reports produced in the 1985-90 period. Countries are classified according to a three-dimensional typology: the ratio of govermnent revenues to GNP, education spending as a share of total government spending, and the primary enrollment rate. This typology, explained in annex III, provides a rough diagnostic framework for comparative analysis of the policy content of education PERs.

# B. The Education Sector in the Macroeconomic Context

iv. PERs are an excellent way of bringing together country economic and sector work (CESW) and linking macro and sector performance issues. But few PERs succeed in convincingly integrating the macro and sector perspectives. Many reports seem to include education in the expenditure analysis as a defensive strategy--to avoid being criticized for the sin of omission. No clear rationale is applied across reports to justify the inclusion of education resources, or human resources in general, in the multisector reviews.

i
v. In many instances, the only link between analysis<sup>of the education sector and the</sup> macro environment is the public sector budget<sup>constraint. Inadequate attention is paid to</sup> links and trade-offs between macroeconomic<sup>and sector priorities. In particular, few reports</sup> evaluate how proposed changes in development<sup>strategies affect educational requirements.</sup> vi. A particularly critical link between the macro<sup>enviromnent and the education</sup> sector is wage and incomes policy. Adjustments<sup>in teachers' salaries must be evaluated</sup> with regard to the fiscal situation, and changes<sup>in the civil service wage structure also must</sup> be evaluated at the sector level. Few reports<sup>even attempt to make this link. Education</sup> sector work rarely includes detailed information<sup>on teachers' wages.</sup> vii. Reports have become more attentive to questions<sup>of suistainability in recent</sup> years, but insufficient attention is still paid<sup>to conflicts between budgetary constraints in the</sup> short and medium term and long-term education<sup>sector objectives. Focused on expenditure</sup> reduction, the reports exhibit little concern<sup>for the sustainability of proposed, rather than</sup> already achieved, reforms. Also overlooked<sup>are the political and institutional, rather than</sup> strictly economic, impediments to sustainability.

# C. Sector Costs and Financing

viii. The analysis of the sector financing situation,<sup>and of the costs of the services</sup> provided, forms the core of education<sup>PERs. A major finding of this report is the</sup> enormous diversity in coverage, quality,<sup>and presentation of these issues among PERs.</sup> Although the new reports have a more<sup>standard format and coverage than do the old</sup> PERs, further progress in this direction is necessary.<sup>Greater standardization of cost and</sup> financing analysis is particularly important<sup>because many operationally relevant conclusions</sup> rely on ad hoc international comparisons.<sup>The credibility of such conclusions needs to be</sup> enhanced through more appropriate and<sup>more widely applicable norms and standards, or</sup> commonly accepted analytical procedures.

**ix.** Assessments of the adequacy of government spending<sup>on education are based</sup> on international comparisons or country<sup>trends, and often on both approaches combined.</sup> There is great diversity in the evaluation<sup>of governments' financial commitment to the</sup> sector and its various subsectors, with even<sup>greater variation in reports' coverage of</sup> important nongovermment sources of financing.

x. The treatmrent of internal efficiency issues<sup>also varies greatly in coverage and</sup> depth. Almost all the reports analyze internal<sup>efficiency issues, but few integrate their</sup> findings with an overall assessment of the government's<sup>financial commitment to the sector.</sup> Similarly, international comparisons of<sup>govermnent spending on education ignore</sup> crosscountry differences in efficiency.

xi. Almost all the reports refer to budgetary<sup>and management inefficiencies that</sup> impair the cost-effectiveness of education<sup>spending. Areas of concern that should be</sup> included are the imbalance between a) recurrent<sup>and capital spending, and b) personnel</sup> and nonpersonnel expenditures.

**ii**
# D. Sector Financing Strategies

xii. The financing strategies that emerge from the PERs are based on an explicit, though sometimes equivocal, sector diagnosis. Spending recommendations are not always consistent with the overall economic assessment. Many PERs--particularly in countries that spend a lot on education--fail to follow up the sector diagnosis with conc - e policy options. Reports focus on intrasectoral rather than intersectoral resource reallocation. The assumption--usually without clear justification--is that intersectoral reform is less feasible than intrasectoral reform.

xiii. Just as public expenditure reviews for resource-rich countries tend to avoid making specific sectoral financing recommendations, so those for resource-poor countries tend to emphasize the need for intrasectoral reallocation and more efficient resource use. The logic of this difference is clear: the more severe the resource constraint, the greater the need to maximize efficiency and to find other sources of financing. But the implicit corollary--that efficiency and equity of resource use are less serious concerns in countries with more resources--is questionable.

xiv. Few reports acknowledge that increased efficiency of educational processes usually requires prior investment in quality improvements, the incremental costs of which initially outweigh the resultirg savings. Furthermore, it is often unclear from the recommended efficiXncy measures whether realized savings are to remain within th'. subsecter or to be reallocated to another subsector. Consequently, the ultimate effect of such measures on the intrasectoral distribut.on of the education budget remains undetermined, even though the equity of this distribution is a stated area of concern.

xv. Crosscountry analysis of sector financing diagnoses and strategies confirms the need for a country typology linking sector financing and output criteria. The typology adopted for this review, though still crude, is useful in identifying exceptions and borderline cases that deserve closer scrutiny. In particular: a) Sector financing issues and strategies are relatively obvious in countries where the level of public spending on education and the sector output are both high or both low. Issues and strategies are more complex when there is an imbalance between the two criteria (for example, a high level of government funding and low sector output). In these cases, the interrelated issues of quality, efficiency, and equity predominate.

b) In assessing the resource situation in the sector, _public resource mobilization_ (the relative size of the budget) should be distinguished from _public resource allocation_ to education. When education sector funding is constrained primarily by the size of the public budget (relative to GDP), the credibility of sector financing recommendations would be enhanced by a more integrated treatment within the macroeconomic framework.

...
# E. Methodolobgy

xvi. Approaches tv cducation cost and financing issues vary greatly, as does sector coverage, even when country circumstances are similar. The sector specialist must bring experience and judgment to bear, but there is still too much room for subjective conclusions and recommendations. These compromise the credibility of policy recommendations.

xvii. A big problem for the analyst is not knowing what part of total education financing is represented by the public budget allocated to the relevant ministry. For costeffective and equitable financing, a multi-source sector budget is required that includes allocations from ministries other than the Ministry of Education as well as from local and nongovernment sources. Such a comprehensive budget also provides a basis for more meaningful crosscountry comparisons.

xviii. A particularly acute problem in the education sector is the imbalance between capital and recurrent spending. PERs in recent years have usually included in sector expenditure analysis both types of spending.

xix. The success or failure of public expenditure recommendations often rests upon the Bank's understanding of the mechanics and politics of the budget process--the relationship of the national accounts to ministerial budgets, the relationship of the expenditure plan and budget to actual spending, and questions of intra- and intersectoral expenditure controls. Several PERs analyze budgeting issues thoroughly and in detail, but rarely discuss their effect on the education sector.

# F. Conclusions and Recommendations

xx. Public expenditure reviews are an excel 'vehicle for analyzing important sector issues in the context of the overall economic and iiscal situation. PERs should give as accurate a picture as possible of how funds to the sector are allocated and disbursed. Providing this picture entails an evaluation of the expenditure data and the expenditure process. In particular: a) If the budget process and the relationship of the budget to actual spending are not transparent, then a budget process review may be a prerequisite for an expenditure review.

b) The PER cannot be substituted for CESW. If the necessary data are not available, ex ante sector work is a prerequisite for any PER that attempts to make and evaluate macro and sector links.

c) For in-depth analysis of sector cost and financing issues, single-sector PERs, or possibly social sector PERs, are more appropriate than multisector reviews.

xoi. Extensive detail is not a substitute for a well-focused analytic discussion of the principal sector issues, priorities, and policies, and their relationship--economic, political, and institutional--to the country's development program. Foremost, there should be a clear iv
rationale for the inclusion of education in the report and an explanation of the relationship of the sector to the overall theme or agenda of the PER.

xxii. The education sector (like other social sectors) has specific characteristics that affect the relationship between sector and macro expenditures and that can skew the impact of "sector-neutral" policies. PERs should pay explicit attention to these concerns, whic' include: a) The different time frames for the attainment of macroeconomic and education sector goals.

b) The often substantial part of education sector spending (governmental and nongovermmental) that is outside the purview ana control of the Ministry of Education.

c) The low ratio of capital to recurrent spending in the sector and the common imbalance between them.

d) The low ratio of nonwage to wage expenditures within the sector's recur en. budget.

e) The large and capital-intensive foreign financing component of sector funding in many low-income countries, which is often fragmented among many donors and projects.

xxmi. The treatment of the education sector in PERs must be analyzed in the broader context of Bank operations, in particular in the context of adjustment programs, which form the background for the PERs in two-thirds of the countries reviewed. This report is the first step in a broader research agenda that includes: a) An analysis of the effects of adjustment-related operations on the education sector.

b) A discussion of the treatment of the education sector in PERs in the context of the economic austerity and fiscal retrenchment that often form the background for sector policy reforms.

c) The development of guidelines for an imp-oved analysis of sector-specific cost and financing issues in the macroeconomic expenditure context.

v
# . **INTRODUCnION**

# A.

# Background

1.01 Since the early 1980s, the Bank has been<sup>shifting from traditional public</sup> investment reviews (PIRs), designed to identify<sup>sector investment priorities within a</sup> coherent macro framework, to comprehensive<sup>public expenditure reviews (PERs) that</sup> include recurrent expenditures. The traditic.-<sup>al PIR was often related to a national</sup> economic plan. The policy dimension of<sup>such a review was essentially limited to assessing</sup> the financial viability of the overall investment<sup>program and, at the sector level, to</sup> identifying "white elephants." The role of education,<sup>if treated at all, was relatively minor.</sup>

1.02 The shift from PIR to PER coincided with the financial<sup>crisis facing the</sup> developing world. Many Bank borrowers increased<sup>their focus on recurrent budgets, as</sup> PIRs and sector work uncovered sectoral evidence<sup>that operation and maintenance costs</sup> of public assets were underfunded. More and<sup>more, the notion of recurrent spcnding as</sup> "unproductive" consumption lost ground to<sup>the realization that a substantial part of the</sup> recurrent budget is a complement to, or substitute<sup>for, capital spending. The assessment</sup> of the effect of planned investments on public<sup>recurrent budgets has thus become a</sup> standard requirement in Bank work.

1.03 The Bank's increasing focus on policy-based iending,<sup>particularly in low-income</sup> countries, has contributed to the growing reliance<sup>on comprehensive PERs, which have</sup> become an instrument for the design and monitoring<sup>of public finance reforms and</sup> stabilization programs. Adequate focus on<sup>the interdependence of capital and recarrent</sup> expenditures is required for effective forward budgeting<sup>and cost recovery, both of which</sup> are strategic elements in thP sustainable reduction<sup>of budget deficits.</sup>

1.04 Since education is largely financed from public sources,<sup>and overwhelmingly from</sup> the recurrent budget, the shift from PIR<sup>to PER naturally has increased attention to</sup> education cost and financing issues. These<sup>issues have also been addressed in a growing</sup> number of self-standing education PERs (sector<sup>cost and financing studies). In the Africa</sup> region, for example, there were fo.r education<sup>sector cost and financing studies and one</sup> PER containing a substantial sexl.ion on education<sup>in the years 1980 to 1984. Over the</sup> 1985-89 period, however, there were 10 education cost<sup>and financing studies-and 32 PERs</sup> with significant education sections.<sup>1</sup> /

1.05 Education is one of the most labor-intensive<sup>public service sectors, by far the</sup> largest employer within the civil service (excluding<sup>the military), and it is a heavy burden</sup> on the recurrent budget. The sector investment<sup>program is small, but its implementation</sup> generates comparatively large incremental recurrent financing<sup>needs. in addition, the sector</sup>

1/AFTED (1989), "Impact of the World Bank's Recent Policy Paper on Education in SubSaharan Africa on Its Sector Studies and Lending<sup>Operations," p. 19, Table 8.</sup>
is under constant expansionary pressure both from demographic trends and, among the poorest countries, from low initial levels of educational coverage.

1.06 In view of these characteristics, education is particularly vulnerable to the effects of economic adjustment and public resource constraints. Increasingly, therefore, the desire to shelter the poor from the adverse social effects of adjustment has become an explicit rationale for including the social sectors in PERs.

B. Scope and Obiectives

1.07 Recent Bank reviews have covered PERs in general and the treatment of the main economic sectorsY Education sector issues in PERs, however, have not yet been evaluated. Specifically, this review has the following objectives: a) To assess the e: te-nt to which the increased attention to education in PERs contributes to a more integrated treatment of education sector issues within the overall economic environment, particularly in adjusting countries.

b) To compare the government's sector objectives, national expenditure priorities, and policy .eforms and, where they are inconsistent, to suggest improvements.

c) To review the diversity in methodological approach, data treatment, and sector coverage among education PERs, identifying best practices according to country-specific circumstances.

VA study of countries undertaking structural adjustment in the period 1979 to 1983 found that 68 percent effected reductions in education spending. In 22 percent of the cases, the education reduction was less in percentage terms than the aggregate reduction; however, in another 46 percent of the cases, education was among the most vulnerable sectors. A separate review of six low-income and lower-middle-income countries that underwent structural adjustment in the 1980s found that the decline in public expenditure on education as a percentage of GNP between 1980 and 1985 was 0.8 percent--almost twice the reduction experienced by low- and lower-middle-income countries in general. The outcome in the absence of managed adjustment, however, is unclear. Marlaine E. Lockheed and Adriaan M. Verspoor, Improving Primary Education in Developing Countries: A Review of Policy _Qptinsi,_ PHR (1990), p. 24 (draft).

2/Tariq Husain, "Public Expenditure Reviews: West African Experience 1982-86," World Bank, December 19, 1986; Tariq Husain, 'The Future Role of Public Expenditure Reviews in the Bank," (no date); Johannes Linn, "Lessons from the East Asia and Pacific Region: Experience with Public Expenditure and Investment Reviews," June 1986; Martha de Melo, "Public Investment/Expenditure Reviews: The Bank's Experience," Country Economics Department, June 1988 (draft); and Mohsen A. Fardi, "Generic Approaches to Expenditure Analysis in Sectoral Public Expenditure/Investment Reviews: The Bank's Best Practices," SPRPA, January 1989, (draft).

2
i1.08 The standard medium-term focus of the<sup>PER may put the education sector,</sup> much inore than the economic sectors,<sup>at a disadvantage when it comes to maintaining</sup> quantitative and qulAitative standards of service<sup>in the face of global resource constraints.</sup> Indeed, the burden of economic<sup>adjustment and government retrenchment falls</sup> disproportionately on education and other<sup>social sectors.- Since this review is limited to</sup> the evidence provided in PERs, the<sup>issue will only be touched upon tangentially. More</sup> important, this review emphasizes the<sup>need to strengthen the integration of se'tor policy</sup> issues and priorities within the macroeconomic<sup>framework.</sup>

1.09 After a brief review of the justification<sup>and operational context of PERs, section</sup> II discusses the relationship between<sup>global and sector issues. In particular, it assesses</sup> how the economic situation affects education,<sup>and how well education PERs reflect the</sup> main macroeconomic constraints and<sup>concerns. Section III reviews the treatment of sector</sup> cost and financing. The review culminates<sup>in a comparative analysis of sector financing</sup> strategies emerging from PERs (section<sup>IV), and an assessment of quality and methodology</sup> issues (.ection V). Conclusions and<sup>recommendations are included in section VI.</sup>

# C. Coverage

1.10 This study is from a detailed review of<sup>selected PER and PIR reports produced</sup> in the five-year period 1985-90.<sup>Fol!owing a broad initial review, it was concluded that</sup> pre-1985 reports are of limited relevance<sup>to the present PER format, which reflects greater</sup> standardization, as well as increased breadth<sup>and depth of coverage. Many PERs refer to</sup> other Bank studies covering sector<sup>cost and financing issues. For comparative purposes,</sup> an additional number of these self-standing<sup>education PERs were selected to complement</sup> the formal, multisector PER reports.<sup>All together 52 reports covering 36 countries were</sup> reviewed (21 in Sub-Saharan Africa;<sup>2 in Asia; 5 in Europe, the Middle East, and Northern</sup> Africa; and 8 in Latin America<sup>and the Caribbean).</sup>

1.11 For the purpose **of** analysis across countries,<sup>the sample was reduced to one</sup> report per country--that is, to 36 reports<sup>(see annex II). This involved selecting one report</sup> for each of the 12 countries with more<sup>than one report in the total sample. The selection</sup> was made according to the reports' coverage<sup>of essential issues. In cases of equal ratings,</sup> preference was given to the most recent<sup>documents and to formal PERs. The focus was</sup> thus maintained on PERs, but without<sup>excluding other important education expenditure</sup> studies. The sample includes 21 standard<sup>(multisector) PERs, 3 PIRTh, and 12 other CESW</sup> reports, of which 6 are self-standing education<sup>PERs. All together, there are 28 multisector</sup> reports and 8 reports covering only the<sup>education sector.</sup>

i/See, for example, Andrea Cornia, Richard<sup>Jolly, and Frances Stewart, eds., Adiustment</sup> with a Human Face. UNICEF. Oxford:<sup>Clarendon Press, 1987.</sup> 3
# D.

# Mthodology

1.12 This report relies on a structured review<sup>of the selected reports based on the</sup> protocol documented in annex I, complemented<sup>by interviews with Bank staff. In addition,</sup> a country typology was developed as a methodological<sup>framework for a comparative analysis</sup> of policy issues related to education costs and financing.

**Table, Ll: Sector** Resource **Mobilizaion and Primant**<sup>Enrollment</sup><sup>**Rate**</sup>

<!-- Start of picture text --> HIGH SRM LOW SRM<br>MIGH Tunisia Philippines<br>PE Lesotho Colombia<br>Botswana Peru<br>Kenya Turkey<br>Zimbabwe Cameroon<br>Honduras Malawi<br>Mozambique<br>Nigeria<br>Zambia<br>Madagascar<br>Tanzania<br>Bolivia<br>Haiti<br>LOW Jordan Niger<br>PE Burkina Faso Guatemala<br>Ghana Guinea<br>Mali Pakistan<br>Rwanda Sierra Leone<br>Morocco Bangadesh<br>CAR Mexico<br>C6te d'Ivoire<br>Senegal<br>Costa Rica<br><!-- End of picture text --> Note: Low-income countries are in bold.

1.13 This typology is documented in annex III.<sup>In a first stage, it classifies countries</sup> according to two basic criteria: _sector resource mobilization_<sup>(SRM) from public sources</sup>

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relative to GNP; and the _pimary enrollment_<sup>_rate_(PE) as a measure of sector output.V</sup> The sample of 36 countries is subdivided with respect<sup>to both criteria into "high" and "low"</sup> country groupings, depending on whether<sup>the value of the respective criteria for each</sup> country lies above or below the median value<sup>of the sample--2.8 percent for SRM, and</sup> 80.3 percent for PE (see annex III, table 1). "High"<sup>and "low" are thus relative terms that</sup> do not indicate value judgments. The outcome is<sup>shown in Table M.1.</sup>

1.14 The second stage defines sector resource mobilization<sup>as the product of overall</sup> _public resource mobilization_ (PRM), as reflected<sup>by the ratio of government revenues to</sup> GNP, and _sector resource allocation_ (SRA)--that<sup>is, the part of government expenditures</sup> absorbed in the education sector. Sector resource<sup>mobilization thus depends on two distinct</sup> policy-related parameters: resource mobilization<sup>and resource allocation. In the PER</sup> context, the former parameter concerns the<sup>macroeconomist, or public finance expert,</sup> while the latter is a focus of interaction between<sup>the macroeconomist and the sector</sup> specialist. As in the first stage, countries were<sup>subdivided into "high" and "low" groupings</sup> with respect to both PRM and SRA according<sup>to their median value in the sample--17.3</sup> percent and 16.1 percent respectively (see<sup>annex III, tables 1 and 2).OJ</sup>

1.15 The end result is a three-dimensional typology (see<sup>annex III, table 3), which</sup> enables one to identify for each country: (i) whether<sup>the sector output is high or low</sup> relative to the sector resource situation, and (ii)<sup>whether the SRM reflects predominantly</sup> the effect of public resource mobilization, public<sup>resource allocation to the sector, or both</sup> combined. The typology thus provides a rough<sup>diagnostic framework for comparative</sup> analysis of the policy content of education PERs,<sup>particularly on sector financing strategies.</sup> Section III of annex III provides a detailed<sup>overview of policy diagnoses and strategic</sup> implications of the various sector financing situations<sup>arising from the interplay of public</sup> resource mobilization, sector resource allocation,<sup>and sector output.</sup>

0/This output criterion was selected because<sup>of the importance among sector objectives of</sup> achieving universal primary education and the<sup>large share of education financing absorbed</sup> by this subsector (around 40 percent on average<sup>in developing countries).</sup> §/The actual position of countries on the PRM/SRA<sup>and SRM/PE scales is illustrated in</sup> annex III, figures 1 and 2.

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# IL **EDUCATAON IN A MACROECONOMIC CONTEXT**

# A. Linking PERs and Bank-supported Adjustment<sup>Operations</sup>

2.01 Public expenditure reviews are time- and resource-intensive<sup>undertakings that</sup> often form the core of Bank-country dialogue<sup>about public sector priorities. They are also</sup> essential in determining priority areas for Bank<sup>support, both project-based and policy-</sup> based.

2.02 In two-thirds of the 36 countries, a Bank-supported<sup>adjustment program was</sup> under way at the time of the report or within three<sup>years before or after it. The link to the</sup> preparation, implementation, or evaluation of adjustment<sup>operations is explicit in only one-</sup> third of the documents (and in only one single-sector<sup>report, the 1986 Turkey Education</sup> and Training Sector Survey). In another one-third,<sup>the adjustment program is merely the</sup> background for the analysis of general or specific<sup>public spending priorities, often in the</sup> form of a government expenditure or investment<sup>plan. Only one of these is a single-sector</sup> report, the 1985 Nigeria Education Sector Expenditure<sup>Review. The final third (five</sup> multisector and six single-sector reports) are general<sup>analyses of public expenditures that</sup> are not explicitly linked to a reform program<sup>or expenditure plan.</sup> 2.03 Thus, the most common reason for a PER,<sup>although not always stated as such,</sup> is to function as an input into or evaluation of<sup>a Bank-supported adjustment program. The</sup> explicit or implicit justification for a PER is<sup>found in the Bank's priorities for its work in</sup> the country more often than in the country's fiscal<sup>management priorities. Indeed, some</sup> Bank and outside experts have contended<sup>that the justification for a public expenditure plan</sup> is derived from Bank, rather than country,<sup>priorities. These critics often find little</sup> coherence between the public expenditure planning<sup>and management exercise and the</sup> government budget, or between the budget<sup>and actual spending. The public expenditure</sup> review is intended precisely to bring clarity and<sup>predictability to the process, but in many</sup> countries it remains an artificial, externally<sup>imposed device not viewed as useful by the</sup> implementing government. For many multisector PERs,<sup>much of the sector-level data are</sup> not collected in the field but are derived by Bank<sup>staff or consultants working on the</sup> government's budget or plan. Because of<sup>the constraints of the process, the sector analyses</sup> are often macro driven.

# B. Including Education in PERs

2.04 No clear rationale is applied across reports to<sup>justify the inclusion of education</sup> or human resources in the multisector reviews.<sup>Of the 28 multisector PERs, 16 include all</sup> principal economic and social sectors, including<sup>education. Half of these justify the</sup> inclusion of education by stating that social<sup>services are, or should be, a government</sup> priority. In addition, five reports focus on the broader<sup>rubric of human resources. Of</sup> i/World Bank Seminar on Public Expenditure Planning<sup>and Management, April 25, 1990,</sup> SEMA Group Management Consultants.

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these, the Jordan report focuses on the distributional effect of economic development and the Bolivia report on the social sectors. The Botswana, Central African Republic, and Cameroon reports treat education briefly under the category of human resources.] 2.05 The Bolivia PER with Special Emphasis on the Social Sectors (1989) presents a clear rationale for its choice of sectors. It reviews the link between public expenditures and economic performance and analyzes the effects of the government adjustment program on public spending. A primary goal of the program was to diminish the role of the public sector while increasing spending and improving the efficiency and equity of delivery programs in the social sectors. Consequently, health, education, and social security are reviewed in separate, but brief, chapters. At the other extreme, the Madagascar report states that education is one of the largest government budget categories, but the sector is not included in the report because a major government review is still under way. Although the institutional difficulties of waiting for the government's report are understandable, it is hard to have faith in the conclusions of a PER when information about one of the major government expenditure posts is not available.

2.06 Among the seven multisector reports that explain the choice of sectors within the budgetary framework, four include education because it is one of the three or four largest items in the government budget. Three reports emphasize social services as essential to the attainment of long-term development goals. In the remaining reports, the lack of a stated rationale implies that education is such an important sector that its inclusion need not be explained. The opposite circumstance exists in the eight singlesector reports, which focus on the education budget with only minor attention to the overall public budget. If a large and essential sector is excluded from the review, or if education is included only cursorily because it is a high-visibility sector, the validity of the PER's recommendations may be compromised. The justification for an expenditure review of one or several sectors should clearly explain the inclusion or exclusion of sectors according to the overall emphasis of the PER.

# C. The Macroeconomic Context for PERs

2.07 One report (Mali) completely ignores the country's economic situation, and another (Niger) provides only the briefest summary of the macroeconomic environment, comparing its declining per capita GDP unfavorably with other countries in Francophone Africa. Characteristically, both of these reports are single-sector PERs. The remaining 34 reports provide some review of the macroeconomic situation. Figure IL.1 summarizes the macroeconomic situation according to the country typology as worsening (11 cases), stable (12), or improving (11). The macroeconomic assessment appears to be inversely related to the public resources situation (that is, optimistic in low SRM countries, and pessimistic in high SRM countries). The time frame for the macroeconomic forecast is short- to mediumterm (usually three to five years) in 14 of the reviews, long-term (looking toward the late 1990s) in 14, and unspecified in the remaining 8 countries.

2/See annex V for a complete matrix of sectors included in each report.

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<!-- Start of picture text --> Figure 111: Iacroeconomic Analysis:<br>Country Situation<br>% of countiies in each categoiy<br>60-<br>5 0 . .................. .................................. ............... ... ..................<br>40 . ........... . , X<br>C o u n t ry<br>MlAll<br>2 0 L .i...In H... PE<br>L ow P E<br>M Hig~~~~~~~~~ th SRII<br>Low SRMI<br>Improving Worsening<br>Stable Not Defined<br>Co untry Macroeconomic Situaation<br><!-- End of picture text --> 2.08 The need to limit public spending is the primary macroeconomic constraint in most countries included in the review. Restrictions on the public budget can be the result of 1) decreasing public revenues or 2) increasing expenditures that have led to unsustainable deficits or the adoption of austerity programs. In nearly one-quarter of the macroeconomic analyses, the country was described as facing a severe economic crisis caused by declining terms of trade or other exogenous shocks such as drought, floods, external disruptions to transportation routes, and war.

2.09 Approximately half of the reports either do not define a macro strategy (singlesector reports) or do not discuss any links between macro and sector strategies. In Turkey and Senegal, for example, an important macro priority is to encourage private sector involvement in the economy, yet the private sector is not mentioned as an important provider and consumer of trained manpower.

2.10 Another common economy-wide priority is export-oriented growth (15 countries). This objective is only supported by specific education policies (promoting skills training as a priority) in four reports. In the other countries, the macro objective is not reflected in specific goals for the education sector. The inverse is also true: nine reports cite expansion 8
of, or quality improvements in, vocational training as a priority without clear reference to the macro analysis.

2.11 Although all but two reports pay some attention to the macroeconomic context for the sector analysis, the treatment is uneven. There is a particular gap in the analysis of economy-wide policy priorities that need to be reflected in sector policies and tradeoffs.

D. Macroeconomic and Education Sector Links 2.12 In analyzing the relationship between the macroeconomic situation and sector concerns, a number of questions should be addressed. These include: a) What is the overall resource situation?

b) What is the public sector's resource situation?

c) How is the size of the resource allocation to education affected by priorities in other sectors, or by political, institutional, or other external forces?

d) What noneducation priorities or exogenous factors affect education sector priorities?

e) Are there changing economic circumstances, for example as a result of adjustment, that could alter the external efficiency of the education system?

# f) Are there external threats to the sustainability of education sector objectives?

2.13 These questions are relevant to most sectors. Four specific concerns of the social sectors are noteworthy. One is the time frame for the review. The obvious conflict between short- to medium-term development goals and the long-term benefits of education spending is often overlooked in multisector PERs, which tend to focus on macroeconomic growth within the medium term (three to five years). But in the long term the quality and quantity of educational output may suffer declines that are not apparent during short-term fiscal retrenchment.

2.14 A second problem is the largely recurrent nature of education spending. Because education is labor intensive, wages make up a large share of the recurrent budget, and because education is overwhelmingly a public sector endeavor in most countries, economy-wide public expenditure adjustments may have a greater than proportional effect on the education sector (see box 111.1). Third, education spending is often divided among several ministries or levels of govermnent. Capital spending is often allocated to a noneducation ninistry (the Ministry of Public Works, for example), so imbalances between capital and recurrent spending are difficult to rectify within a narrow, sector perspective. A fourth problem in many low-income countries is the high proportion of foreign financing in the social sector investment budget. Foreign-financed inputs are often ad hoc, unsystematic, and driven by donor, not country, priorities.

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2.15 The ability to confidently analyze general and sector-specific issues would require massive flows of information and analysis of feedback mechanisms in both directions-from the economy to the education sector and vice versa. In an ideal world, all of the necessary data would be available, and the intra- and intersectoral relationships would be transparent. In reality, however, time and resources are always constrained, and information is always imperfect. Nevertheless, the following links are of particular importance to understanding how the education sector relates to government expenditure priorities.

2.16 Bxernal forces driving education policies. Three-quarters of the reports make explicit reference to external forces that influence education policy. The percentage is slightly higher among high PE countries, perhaps because a large education sector involves a large share of the population, and is more dependent upon other social, economic, and political forces. The most frequently mentioned external factors include: a) Demographic pressure. A high rate of population growth is the most common external factor (in one-half of the countries studied) influencing education policy. In some countries, a high demand for education coupled with a high population growth rate force increased allocations for educational expansion at all levels. In other countries, increased enrollment rates and expansion of the school system (in Tunisia, for example, universal education is to be expanded from six to nine years) are an intermediate means of reducing the number of new entrants into the labor force because sufficient employment and other opportunities for young people are lacking.

b) Demand for education. Only a few reports (Guinea, Pakistan) explicitly make the connection between the demand for education and external efficiency. These reports argue that changes in the demand for education (in general or for specific skills) are a rational response to changing perceptions about the job market for graduates with various skills.

c) Labor market needs. Economic development is impeded in Turkey and Lesotho because of shortages of skilled labor. Several reports acknowledge that out-migration of skilled labor greatly affects the education sector, which must take into account domestic and foreign employment opportunities. The Haiti report points out that increased spending on vocational and higher education would not be efficient because Haitian off-shore industry employs primarily lowskilled workers. In most reports, however, the macro level concern about outmigration and a lack of skilled labor, particularly in the light of skills-based outward-oriented growth, is not translated into sector reform toward that end.

d) Donor preferences. Several African reports pointedly refer to the importance of donor preferences in determining education policy. In Malawi, donor preferences are reflected in an economy-wide budget that is too investment intensive, and in the choice of specific investment priorities. The study finds that foreign donors are more willing to shift funding from investment to recurrent 10
needs if the macroeconomic situation is stabilized. In other words, macroeconomic adjustment is essential before donors are willing to finance activities without a tangible output. In the Central African Republic, no global program of investment priorities exists, and almost all investment is externally financed. Reports recommend closer coordination and better prioritization of donor projects, but they offer little structure for so doing.

2.17 External threats to the sustainability of education priorities. As illustrated in figure 11.2, concerns for the sustainability of sector achievements seem to be motivated by the fear of slipping on performance standards that have already been met, either in terms _of primary enrollments or sector resource mobilization._ Where both these indicators are low, only one report voices concerns about sustainability. When one indicator is low and the other is high, 43 percent of the reports discuss sustainability, and all but one reports do this when both indicators are high. Ten reports express concern that current subsidy levels are unsustainably high given public budget constraints.

<!-- Start of picture text --> Figure 112: Threats to Sustainability<br>ot Education Sector Priorities<br>I 0a % ot countries in each category<br>!100-<br>8 0 - ..... ........ ................................ ... .................................<br>60 ...... .................................... ......... ........................................ Contryt<br>Categories<br>4 0 - ..... I .......................... _ A . ll countiles<br>High SRII/Eigh PE<br>2 0 - .. . ..... . . . . . ............ ME igh SRI ILow PE<br>Low SRII/Hiqb FE<br>Lov SRII/LoU PE<br>0<br>All threats, Demographic pressure<br>Budqet constraint Demand<br>'The category 'All threats' includes the budget constraint, denographic pressure,<br>iind the demand for education, but is not necessarily the sun of the other three<br>ue to double countinq.<br><!-- End of picture text --> 11
2.18 **Except** for the budget constraint, there is little discussion of external threats to proposed policies ex ante. Other threats addressed in only a few cases are population growth and the demand for education. In many countries, the social demand for higher e^ducation exceeds the requirements of the labor market and jeopardizes both the intrasectoral balance of resource allocation and the ability to provide quality education. A similar problem is the conflict between the demands of the labor market for vocationally skilled workers and the low social demand for vocational training relative to academic training in many countries.

2.19 The Turkey Education and Training Sector Survey is one of the few reports that addresses the implications for education of a changing economy. It clearly states that the outward-oriented economic development program and attendant need for skilled labor has major implications for human resources policies. Most reports, however, do not specifically discuss the effect of noneducation policies on education.

# E. Sector Issues and Priorities

2.20 Exansion. access. and equity. The reports cover numerous sector issues at various educational levels. For the purpose of this review, the issues are divided into the following broad categories for primary and postprimary education: access, quality, equity, and internal and external efficiency. Many developing countries have greatly expanded their educational system, particularly primary education, but this does not necessarily reflect an improvement in the above-mentioned areas of concern. Equality of access to education by sex, region, religious, ethnic or other group; equity among income levels; the quality of education; the internal efficiency of the system (drop-out and repeater rates, unit costs per graduate); and external efficiency (the relationship of the skills taught to the demand for them in the labor market) are all priority sector issues that shed light on the costs and benefits of expansion of the school system.

2.21 Figures II.3 to II.5 categorize reports that not only mention these sector issues but explicitly treat them as priorities. Figure ID.3 divides the treatment of the issues by primary and postprimary education; figures II.4 and 11.5 graphically present the difference in coverage of these priorities according t- the typology. The discussion that follows includes reports that mention the issues without necessarily prioritizing them. The percentages given may, therefore, differ slightly from those in the graphs, which measure explicit priorities.

2.22 Stated sector priorities in the reports reviewed (figure II.3) appear to be largely focused on the primary level, particularly in the case of access, quality, and equity issues. This focus is in line with current chinking inside and outside the Bank, which emphasizes primary education as the key to universal basic literacy. From an overall sector management perspective, however, there is no rationale for access, quality, and equity issues commanding a lower priority at the postprimary level than at the primary level.

2.23 Expansion of the education system is most frequently mentioned as a sector prioiity at the primary level, and, as one might expect, particularly in low PE countries in the low-income range. Postprimary expansion is more often an objective in high PE 12
countries. Primary expansion is suggested most frequently<sup>for countries in the low</sup> SRM/low PE group, whereas postprimary expansion is<sup>advised for high SRM/high PE</sup> countries.

2.24 Similarly, the need to imLprove access to primary education<sup>is most frequently</sup> suggested for low SRM/low PE countries, but in the middle-income<sup>rather than low-income</sup> range. Interestingly, equity issues concerning postprimary<sup>levels are most frequently</sup> mentioned with respect to the group of countries that combine<sup>a high primary enrollment</sup> rate with a low sector resource situation (high PE/low<sup>SRM). Special concerns are the</sup> urban poor, rural areas, girls, and disadvaittaged regions<sup>and ethnic groups.</sup> <!-- Start of picture text --> Figure 11.3: Sector Priorities<br>Prinary vs. Postprimalry Education<br>% of coantries<br>100 -<br>80 -. ..... .. ....I............................................................................<br>6 0 - g ;................ ........... ..............................................<br>4 0 - ........ ...... ..........i ...... ............es Access<br>Quality<br>2 0- ................ | X l gQEquity ......<br>X lInteinal Efficiency<br>0 .Exlernal Efficiency<br>Primary Postpri.zary<br><!-- End of picture text -->

2.25 Education quality. Thirty of the 36 countries at the primary<sup>level and about half</sup> of the countries at the postprimary level recommend improvements<sup>in education quality.</sup> Specific quality concerns include more supplies and materials;<sup>better maintenance, teacher</sup> training, and management and supervision; curriculum<sup>improvements; and higher teachers'</sup> salaries, especially for teachers of quantitative subjects.

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2.26 At the primary level, quality improvement is a stated priority among low-income countries more often than among middle-incomre countries. At this level, moreover, it has the highest incidence among countries that combine a low SRM with a high PE, or viceversa, suggesting that an imbalance between sector resources and sector output raises specific equity issues (see annex III). At the postprimary level, recommended quality improvements appear to be unrelated to a country's SRM or PE situation.

<!-- Start of picture text --> Figure 11.4 Sector Priorities<br>Primary Education<br>% of countries in each category<br>100 -<br>s o0 . ... . . M. . ............. ...I............................................<br>6 0 - ........................X . ... ... .. .......- . . ..... ......... . C ou tly<br>Ca teaoaries<br>40 - ... ... ....jEf ...........h . ........ M A leeE<br>M Hijgh SR1I/High PE<br>MB High SRI/low PE<br>2 0 - . | | l['l|- -..... .... ... .... .........L gh SR IiLg MLow SRII/Hiqh PE<br>m.L Low SRMl1Low PE<br>0<br>Access Equity Exteinal efficiency<br>Quality Internal efficiency<br>Sector Pfioiities<br><!-- End of picture text -->

2.27 Internal efficiency. Almost all reports provide data on drop-out and repeater rates, student/teacher ratios, and unit costs per student. All but three reports (Botswana, Central African Republic, and Sierra Leone) discuss internal efficiency, particularly at the primary level. A principal objective is to reduce unit cost per graduate by improving student flows and transition rates and increasing school retention. However, only one 14
report (Malawi) actually presents data on unit cost per graduate, rather than per studentY Instead, the reports concentrate on gross versus net enrollment and drop-out and/or repeater rates as indicative of the gap between cost per student and cost per graduate.

<!-- Start of picture text --> Figure 11.5: Sector Priorities<br>Postprimary Education<br>6 of countries in each category<br>60-<br>50- . ..... ......... ........ ........................ .....<br>4 0- .................... ...... ... . ...... . ......... unt y<br>3 0 - - .................... _.All Categories<br>All<br>20 . , ....... ................ ...3.... HZ igh SR]I/Htgh PE<br>.igk H SRIIILow PE<br>1.0 ~~~~~~~~~. .. Low SRIfIIlliq PE<br>10-L _ow SR1/Low PE<br>Access Eqaily EilecDal efficiency<br>Quality lnternal ettictency<br>S ectoi Priorities<br><!-- End of picture text --> 2.28 All of the countries where public spending per student (rather than total unit cost per student) is considered excessive are advised to reduce it, usually by increasing internal efficiency. As is the case with equity issues, concern for internal efficiency is most common in countries with an imnbalance between sector resources and output (either high SRM/low PE or low SRM/high PE countries). At the primary level, internal efficiency is most important in high PE countries--that is, countries where high enrollment has already been achieved, perhaps at the expense of quality and cost-efficiency of output (figure I1.4).

2/Per graduate expenditure is the cost of producing a graduate of a particular education program, taking into account the total number of years of educational output required at the prevailing internal efficiency rate. Total educational output, at a given annual per student cost, includes wastage from repeaters and drop-oi vs.

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At the postprimary level, low SRM countries--that is,<sup>countries where resources are</sup> constrained--exhibit most concern for internal efficiency<sup>issues (figure 11.5). Although</sup> internal efficiency ranks high as an identified sector issue<sup>both at the primary and</sup> postprimary levels, only half the reports recommend<sup>policies designed to improve internal</sup> efficiency--policies that would lead to better qualified teachers, more<sup>materials, lower unit</sup> cost per graduate, and so on. For example, only 10 of<sup>25 countries where drop-out and</sup> repeater rates are considered to be a problem are specifically<sup>advised to reduce them.</sup> 2.29 The relationship of the internal efficiency improvements<sup>recommended in the</sup> education sector chapter to the overall cost and financing<sup>analysis of the macro chapters</sup> is particularly weak. How many more (or fewer) teachers?<sup>What is the cost of upgrading</sup> the quality of teachers? How does the goal of lower unit<sup>cost per graduate relate to the</sup> various components of unit cost per student, and what are the<sup>immediate and longer term</sup> implications of this goal for the education budget?

2.30 External efficiency. About two-thirds of the reports argue that education<sup>sector</sup> expenditures are inefficient on the basis of external efficiency criteria.<sup>This problem is cited</sup> most frequently for high PE countries, and in single-sector<sup>reports. Eighteen reports</sup> describe unemployment rates by level of education completed.<sup>Of these, 12 cite figures for</sup> unemployment rates among higher education graduates. One-third of the reports recommend improving the external efficiency (employment<sup>of graduates) of the education</sup> system, although again the details, particularly regarding costs<sup>and benefits, are often</sup> unspecified.

2.31 Few, primarily high SRM countries, prioritize external efficiency<sup>at the primary</sup> level. Concern for external efficiency is much greater at the<sup>postprimary level among all</sup> country categories, but particularly among countries with an<sup>imbalance of indicators (high</sup> SRM and low PE or vice versa). In general, concern<sup>for the external efficiency of</sup> education is significantly higher in high PE than in low<sup>PE countries (74 percent versus 47</sup> percent of the reports). This seems logical, suggesting<sup>a critical PE level below which</sup> concerns for the social returns (basic needs, literacy, equity, poverty-alleviation,<sup>and so on)</sup> to investment in primary education prevail, and above which<sup>concerns for economic and</sup> private returns to more costly investment in postprimary<sup>education and training take over.</sup> Unfortunately, few reports mention the effects of noneducation<sup>and macroeconomic policies</sup> on the external efficiency of education/training processes.

# F. Overall Assessment

232 Many reports seem to include education in the expenditure<sup>analysis as a</sup> defensive strategy--to avoid being criticized for the sin<sup>of omission. In only a few is</sup> education an integral part of the economic development<sup>or adjustment strategy. As a result,</sup> it is often unclear how the implementation of sector priorities<sup>would affect economy-wide</sup> goals.

2.33 The opposite is also true, although less frequently. In many<sup>instances, the sector</sup> review has taken place in a void wherein the only connection<sup>to the overall economic</sup> environment is a budget constraint. Inadequate attention is paid to external<sup>factors and</sup> 16
policy priorities that may influence education policy, with the exception of demographics. In particular, few reports clearly analyze how changes in a country's product mix (moving from nontradables to tradables, for example) are linked to education requirements.

2.34 It is difficult for poor countries to allocate donor financing efficiently. From the perspective of the PER, a first step toward more efficient allocation is to collate all outside financing to the sector by project and by its capital and recurrent components.

2.35 Reports have become much more attentive to questions of sustainability in recent years, but insufficient attention is still paid to conflicts between medium- and longterm priorities. Except for the budget constraint, reports exhibit little concern for proposed reforms (rather than those already achieved) and for the political and institutional, rather than strictly economic, impediments to sustainability.

17
# **IIL** SECTOR **COSTS** AND FINANCING

3.01 The analysis of sector financing, and of the costs of the services provided, forms the core of the public expenditure review, which leads to the formulation of financing strategies and to the assessment of their overall effect on the budget. What is the current and prospective level of sector resources relative to defined priorities and objectives, and how efficiently does the sector manage these resources? In this context, one might expect education PERs to take a clear position on the following issues: a) The adequacy of the resources allocated to the sector.

b) The potential for nongovernment resources to be mobilized in the sector.

c) The adequacy of the intrasectoral allocation of budgetary resources.

- d) The efficiency of public management of sector resources.

3.02 There is enormous diversity in coverage, quality, and presentation among education PERs with regard to the analysis of sector cost and financing issues. Greater standardization is needed, particularly since many operationally relevant conclusions in this area appear to rely on ad-hoc international comparisons. The credibility of such conclusions needs to be enhanced through specific research focusing on the development of more appropriate and more widely applicable norms and standards, or commonly accepted analytical procedures.

# A. Budgetary Resource Allocation

3.03 Among the 36 reports, 16 consider the level of government spending on education to be insufficient, and 8 to be relatively high. As many as 12 reports, of which 9 are multisector PERs, do not make a judgment on this issue. Among these 12 reports, there are cases of apparent sector underfinancing, with budgetary allocation to the sector as low as 8 percent of total government expenditures (for example, Tanzania and 7,ambia). There are also cases of relatively high, and likely unsustainable, budgetary allocation. For example, Rwanda has allocated 28 percent of its budget to education--a budget that is heavily constrained by a low rate of public resource mobilization (13 percent of GNYP).Y I/As documented in annex III, country characteristics (such as sector resource mobilization, public resource mobilization, sector resource allocation, and the primary enrollment rate) are assessed against the median value of each characteristic in the sample of 36 countries covered in the study: SRM, 2.67 percent of GNP; **PRM,** 16.7 percent of GNP; SRA, 16.0 percent of total government expenditure; and PE, 80.85 percent gross primary enrollment rate. Such assessments are comparative findings rather than normative judgments. As such, however, they point to a potential issue requiring further attention. Rwanda's budgetary allocation to education is comparatively high, but whether it is too high depends on a host of other factors.

18
3.04 By and large, assessments of go- ernment financing<sup>for education are consistent</sup> with the country typology established for comparative<sup>analysis. As shown in table I1.1, the</sup> proportion of reports considering government spending<sup>to be insufficient, or high, is related</sup> to the _sector resource mobilization_ (SRM) criterion<sup>and, to a lesser extent, to the</sup><sup>_primary_</sup> _enrollment_ rate (PE) criterion; 13 of the 16 "insufficient'<sup>assessments relate to low SRM</sup> countries, and 7 of the 8 "high" assessments are for high<sup>SRM countries.</sup> 3.05 Government spending on education (SRA) is considered<sup>insufficient in three</sup> high SRM countries: Burkina Faso, Ghana, and Lesotho.<sup>All three are in the low-income</sup> range, and the first two also have a relatively<sup>low sector output in terms of primary</sup> enrollment rates, which to some extent justifies<sup>the assessment.</sup> Government spending on education is rated high in one low SRM country,<sup>Madagascar (2.4 percent of GNP).</sup> The basis for this assessment lies perhaps in<sup>the report's narrow focus on the budget</sup> allocation to the sector (16 percent), which<sup>is the sample's median value, without due</sup> attention to its relatively low overall public resource<sup>mobilization (15.1 percent, compared</sup> with 16.7 percent for the sample).

Table M.1: Goverument Spending on Education

|Country Groupings|Low|High|Position|TQIal|
|---|---|---|---|---|
|Low SRM/Low PE|_5_(71%)|0<br>(0%)<br> <br>|2 (29%)<br>|7 (100%)<br>|
|Low SRM/High PE|8 (61%)|1<br>(8%)<br>|4 (31%)<br>|13 (100%)<br>|
|High SRM/Low PE|2 (20%)|4 (40%)<br>|4 (40%)<br>|10 (100%)<br>|
|High SRM/High PE|1 (17%)|3 (50%)|2 (33%)|6 (100%)|
|Total|16 (43%)|8 (22%)|12 (33%)|36 (100%)|

3.06 Assessments of the adequacy of government spending<sup>on education are based</sup> on international comparisons or country trends, and<sup>often on both approaches combined.</sup> However, the nature of international comparisons<sup>and the type of trends examined differ</sup> widely country by country, along with the quality<sup>and credibility of the assessment.</sup> 3.07 First, the definition of the government's financial<sup>commitment to the sector</sup> differs from country to country. Reports usually focus<sup>on the share of education in total</sup> or recurrent government expenditures, or on the ratio<sup>of government education expenditures</sup> alBurkina Faso is also a border case with respect to<sup>SRM: 2.9 percent of GNP versus the</sup> sample's median value of 2.79 percent.

19
to GNP. Both approaches have weaknesses that can compromise the interpretation of trends or of international comparisons, unless they are used in combination. Budget allocation percentages (total or recurrent) show the government's financial commitment to the sector, but fail to measure the ultimate impact of this commitment on the effective mobilization of sector resources relative to the national resource base. Niger and Senegal, for example, both allocate about 21 percent of the government budget on education, but this conmmitment represents more than 4 percent of GNP in Senegal and only about 2 percent in Niger. Alternatively, public spending on education in Niger and Cameroon represents about the same percentage of GNP, but in Cameroon this outcome reflects a significantly lower level of government financial commitment to the sector (about 13 percent of the budget) than in Niger.

3.08 Second, the standards used in international comparisons differ markedly. Government financial commitment to education can be measured against the corresponding average for all LDCs combined, for the entire continent, for the region, for selected individual countries, or for a specific LDC income group. In a number of cases (6 of 22 international comparisons), government spending on education is vaguely characterized as higher/lower than in "other" or "similar" countries (with or without regional reference). lThis comparative evidence, which is often used to make a case for spending more on education, does not have a solid analytic base. Turkey's report is an example of good practice in this respect: it makes comparisons with other countries not necessarily in the same region or with the same income but according to specific criteria. For example, it compares enrollments by level of education and government spending on education as a share of all government spending and as a share of GNP with South Korea, another country committed to growth from the export of manufactured goods.

3.09 Third, whereas most reports analyze internal efficiency issues, few integrate this analysis with the overall assessment of the government's financial commitment to the sector. Similarly, international comparisons of government spending on education ignore crosscountry differences in sector efficiency, which further limits their usefulness.

3.10 Ten of the reports focus on the implications of the sector resource constraint for beneficiaries, as evidenced by a decline in real expenditures per student, and eight of these incorporate this evidence into the assessment of the governrnent's financial commitment to education. A number of reports cover the evolution of real expenditures and student enrollments, but do not derive the underlying trend in unit expenditures. Unit expenditures per graduate rather than per student, which conveniently integrate the internal efficiency dimension in the sector cost and financing analysis, are mentioned in only three reports (Malawi, Morocco, Lesotho), and actually quantified in only the first of the three. Again, the lack of information on unit costs per graduate reflects the tremendous difficulties in obtaining or estimating these figures.

3.11 Over one-third of the reports describe a decline in the share of public expenditures allocated to education; most do not explain the phenomenon, or they refer vaguely to adjustment-related austerity measures. Several reports simultaneously express concern about a substantial decline in real teachers' salaries, which makes it harder for the education system to attract and ietain qualified staff. Few reports, however, make the 20
connection between the relative evolution of personnel versus nonpersonnel expenditures, and what ultimately happens to the share of government expenditures going to educatiom A fall in civil service wages relative to the average price of nonpersonnel expenditures, other things being equal, seemingly leads to a reduction in the share of government spending accruing to the most labor-intensive sectors, among which is education (see box 111.1). This tendency is further exacerbated where teachers' salaries have declined more than the average civil service wage.

3.12 The Bolivia report is an interesting exception in this respect. It acknowledges that the country's adjustment program has resulted in a decline in government social spending in real terms and as a share of total expenditures (spending declined from 35 percent in 1984 to 25 percent in 1986 and then recovered to 30 percent in 1988). It argues, however, that the "social cost of adjustment" is not as high as the evidence suggests because the expenditure item that has fallen is salaries, particularly of teachers, whereas purchases of school materials and health supplies were about ten times higher in 1988 than in 1984. The report concludes that, whiie the fall in teachers' salaries would lower the quality of education in the long run if not remedied, expenditures on materials and supplies "have a more direct short-term relationship with the quality of the services rendered." Hence, the evidence indicates "that quality has improved following the adjustment."<sup>2</sup> ' 3.13 Public expenditure reviews should give more attention to the relationship between structural adjustment and public resource allocation to social sectors. This issue is much more complex than can be observed from aggregate intersectoral resource allocation percentages, which are sometimes targeted in policy-based Bank lending for education. They are rather unreliable indicators of government intentions and performance, unless these expenditures are broken down by purpose or by end use, and can be compared with sector objectives.

# B. Non-Central-Government Resources

3.15 With a few exceptions, all reports cover non-central-government financing at various levels of the education system, providing scattered quantitative or qualitative evidence (see figure III.1). PER emphasis on the mobilization of nongovermnent resources is most prevalent for low SRM countries, as well as for high PE countries where sustaining a high primary enrollment rate requires the continuing availability of complementary financing.

l/Bolivia--Public Sector Expenditure Review with a Special Emphasis on the Social Sectors (Report No. 7746-BO, September 1989), Chapter III, pp. 25-27.

21
# **Box** M.1: Civil Service Wages and Public Spending on **Education**

How do relative changes in civil service salaries affect public<sup>spending on</sup> education? Consider this simple example. A country has an<sup>initial government</sup> budget of 100 units, distributed as follows:

|Situ-ation 1:|Go|vernment Budget||
|---|---|---|---|
|Expenditures|Total|-LEducation|Share of<br>Education<br>in Total|
|<br>Personnel|40 (40%)|14 (78%)<br>|_35%_<br>|
|Nonpersonnel|60 ("QO4)|.222?|7<br>1%|
|Total|100 (100%)|18 (100%)|18%|

Education absorbs 18 percent of the total budget (recurrent and<sup>capital, but</sup> excluding the debt servicing burden).-J Pcrsonnel expenditures<sup>account for 40</sup> percent of total government expenditures, but they represent about<sup>twice this</sup> much in the education sector budget (78 percent).

In many countries, particularly in Sub-Saharan Africa, adjustment<sup>and</sup> budgetary retrenchment have led to a drastic decline in civil service<sup>wages. This</sup> is particularly true where governments have protected employment<sup>rather than</sup> incomes.P/ Situation 2 assumes a 50 percent cut in personnel<sup>expenditures,</sup> reflecting an identical cut in average wages at an initially constant<sup>govermnent</sup> employment rate. The wage cut is identical in all government sectors; nonpersonnel expenditures remain constant in real terms.

|Situation 2:|Go|vernment Budget||
|---|---|---|---|
|Expenditures|Total|Education|Share of<br>Education<br>in Total<br>|
|<br>Personnel|20 (25%)|7 (64%)<br>|35%<br>|
|Nonpersonnel|60 (7%o)|4 (36%)|7_To_|
|Total|80 (100%)|11 (100%)|14%|

# Situation 2:

Whereas the share of education in each expenditure component<sup>has</sup> remained constant (35 percent for personnel expenditures and<sup>about 7 percent for</sup> nonpersonnel expenditures), its share of the total budget<sup>has automatically</sup> declined from 18 percent to 14 percent because of the higher<sup>incidence of</sup> personnel costs. Personnel costs have declined from 78 percent<sup>to 64 percent of</sup> the sector budget.

(continued)

**22**
# **Box MA.** (continued):

Pressure is strong to increase government employment, overall and at the sector level, at the cost of nonpersonnel expenditures, particularly material consumption.rY Situation 3 assumes that half the decrease in real wages is offset by incremental hiring, albeit within the new budgetary ceilings prevailing in Situation 2.

|Situation 3:|G|overnm|ent Budge|t|
|---|---|---|---|---|
|Expenditures|<br>Total|<br>Edu|<br>lcation|<br>Share of<br>Education<br>in Total|
|Personnel|30 (38%)|10.5|(95%)|35%|
|Nonpersonnel|50 (62%)|0.5|_(5%)_|1%|
|Total|80 (100%)|11.0|(100%)|14%|

The personnel budget has shrunk, while the number of civil servants has grown. Consequently, personnel costs have increased from 78 percent to 95 percent of the sector budget, and the proportion of nonpersonnel expenditures has eroded.

This scenario makes clear that change in the allocation to the education sector is not always the result of concrete reallocative decisions. In fact, if the share of education in the total budget remains unchanged in the face of a governiment-wide fall in real wages, the sector perhaps is being sheltered from the effects of adjustment.

'/Situation 1 is based on the following assumptions: 20 percent of the recurrent budget is allocated to education but only 10 percent of the capital budget; the ratio of recurrent to capital expenditure in education is 10:1; and personnel costs account for 50 percent of the total recurrent budget and 85 percent of the recurrent education budget.

t-/Average civil service salaries in Zaire, for example, fell by more than 80 percent between 1975 and 1985 (Zaire--Education Sector Memorandum, Report No. 7169ZR, February, 1989).

£'/Until recently, many countries guaranteed public employment for graduates of secondary and higher education. At the sector level, demographic pressure combined with low initial enrollment rates create a rapidly increasing need for teaching staff.

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3.16 Thirteen reports refer to the provision and financing of educational services by local governments, but few provide quantitative estimates, and in some cases it is not clear whether and to what extent local governments are financed through the central government budget. Most reports mention private education financing, either through private schools or through parental contributions to the financing of public schools, but again they cite scant quantitative evidence. Only about one-third of the reports give the contribution of foreign donors to the financing of the sector's capital or recurrent budget. The last area is clearly one in which the Bank is w A positioned to assist in providing better oversight. Chapter V discusses each of these items in detail (para. 5.09-5.19).

<!-- Start of picture text --> Figure HI11 Coverage of Non-Central-<br>Governient Sources of Financing<br>6 % of countries in each category<br>50 . ................... ... ... . .<br>4 0 . ......... ......... .......... .......... . ...... ............. ...............<br>C ountry<br>30 . .................................. Categories<br>All<br>2 0o .-_-... .. .... .... E EMLow PEHiqgh SRIEZ<br>L ow S R I<br>0<br>Local goveinment Private contributlon<br>Private schools Foreiqn donors<br>Sources of Financing<br><!-- End of picture text --> 3.17 On the whole, the design of sector financing strategies requires a more comprehensive assessment of total national spending on education, and of its distribution among the various participating actors, than is usually reflected in education PERs. Admittedly, the time and effort needed to generate such a comprehensive assessment are well beyond the resources available for PERs. It is therefore the function of sector work to try to provide the required knowledge base. A comprehensive statement of the financing structure of the public education sector, which includes contributions from sources other 24
than ti;e central government, remains a minimum requirement. In several of the reviewed cases, su-h an evaluation could have been provided since most of the required informationi was contVined in the report but not integrated, or was available from sector work but not used (see boxes I11.2 and 111.3).

_am,k_ **WI.! fblic Spendinmg** on Education **hi Haiti and Tanzania** Haiti's education indicators resemble those of low-income African countries more than those of its Caribbean neighbors or Asian low-income countries. But unlike most Africaan countries, the Haitian educational system depends heavily on nongovernment financing sources. Public recurrent and investment expenditure for FY 1983 was about 9 percent of all government spending, equal to about 1.5 percent of GDP. Total education expenditure--public and private--amounted to more than 6 percent of GDP, of which only about 20 percent was funded from the Treasury. Thirty percent came fiom external sources and from local and foreign charities (official donor aid plus religious organizations and NC-Os); fifty percent came from parents.

Public spending on education in Tanzania represents a larger share of GDP, 2.4 percent in FY 1987. Although local authorities and parents spend some on primary education, these amounts are small relative to the total budget. Since the central goverrnent provides almost all education financing, total sector spending in Tanzania remains at about 2.4 percent of GDP despite education's similar share of the public budget (10 percent compared with 9 percent in Haiti).

One might conclude that Tanzania and Haiti have a comparable commitment to education and that this commitment is reflected in roughly comparable output indicators (gross primary enrollment rates of 78 percent of the age group in Haiti and 69 percent in Tanzania). This conclusion, however, would be inaccurate. Haiti's education sector receives almost three times more resources (as a percentage of GDP) than does Tanzania's, but with the same outcome, less equitably distributed, at the primary level. Thus, when all inputs are taken into account, the Tanzanian situaiicn still reflects acute underfinancing of the sector, while the primary issue in Haiti is one of inefficient and inequitable management of sector resources.

Sourc: "Haiti: Public Expenditure Review," Report No. 6113-HA (September 26, 1986); and 'Tanzania: Public Expenditure Review," Report No. 7559-TA (May 22, 1989).

25
# **Box 111: Calculating a Multiresource Budget for** Education Spending

In 1986/87, Rwanda committed about 23 percent of capital and recurrent public expenditure--about 3 percent of GDP--to public ed.;ation. Central government recurrent spending represented about 80 percent of total sector financing. Financing varied substantially by level of education. Municipalities (local government) contributed only to primary and vocational education; foreign donors supported only secondary education and university. The contribution of parents increased with the level of education, then dropped to 0 percent at the university level. Only vocational schools and the university had minor amounts of self-financing.

|||Level o|f Education|||
|---|---|---|---|---|---|
||aimarY|Vocational|Secondarv|Un versita|igW|
|Financing Source||||||
|Central governner.t|84.3%|75.8%|74.0%|92.0%|82.4%|
|Municipalities|5.5|4.0|---|---|3.9|
|Self-financing|---|2.3|---|1.9|0.4|
|<br>Parents|10.2|17.9|20.2|---|11.8|
|Foreign cooperation|---|---|5.8|6.2|1.6|
|Total|100.0%|100.0%|100.0%|100.0%|100.0%|
|Public spending/student|50|191|611|4,258 ($|US)|
|Total unit cost/student|59|253|825|4,630 ($|US)|

al985/86 Source: "Rwanda: Rapport sur le cofit et financement de l'enseignement primaire, secondaire et superieur," Report No. 7362-RW (1989).

The variation in the degree of public subsidization (government spending as a percentage of total spending) demonstrates clearly the importance of determining and including all major financing sources, although these may vary substantially from country to country, in any comprehensive sector expenditure. analysis. Since the composition of non-central-government spending on education also varies greatly bv level of education, analyses of intrasectoral resource allocation that are based only on central govermnent expenditure may seriously misrepresent the commitment of national resources to each level of education.

26
C.

The Intrasectoral Allocation of Budgetary Resources 3.18 Intrasectoral resource allocation issues are identified in 27 of the 36 reports, leaving 9 reports without diagnosis in this area. Most reports state that current allocations benefit higher education at the expense of primary or basic education.

3.19 There is greater unanimity on excessive public funding of higher education (23 reports) than on underfunding of primary education (17 reports). Some reports describe other levels or areas of the education system as overfunded or underfunded. Nine reports consider that the secondary level is receiving an inordinate share of the education budget, and two reports (Bangladesh, Rwanda) judge the allocation to vocational training to be excessive. Underfunding of vocational education is noted in five reports; of secondary education, one report (C6te d'Ivoire); and of higher education, one report (Turkey). Regarding government underfunding of vocational training, four of the five cases relate to countries with a low level of sector resource mobilization (Guinea, Niger, Turkey, and the Philippines).

3.20 In most cases, a statement that too little is spent at the primary level (or other level) is accompanied by a statement on the subsector (predominantly higher education) that receives too much. However, there are also quite a number of "partial" assessments --that is, of a subsector receiving proportionally too much without a corresponding indication of which subsector suffers most from this misallocation, or vice-versa.

3.21 As might be expected, the assessment of the intrasectoral allocation of public resources with regard to the trade-off between primary and higher education is strongly related to the primary enrollment rate of the respective countries (see table III.2). Thus, 71 percent of the reports covering low PE countries consider budgetary allocations to primary education insufficient, compared with only 26 percent of the reports for high PE countries: the tendency is identical with respect to higher education. The only two exceptions to this pattern among the 17 low PE countries (Sierra Leone, Jordan) are reports that do not take a position on this issue at all; on the other hand, among the 19 high PE countries, 5 (Madagascar, Zambia, Turkey, Lesotho, Honduras) explicitly consider resource allocation to primary education to be insufficient.

3.22 The pattern of PER evaluations of the relative allocation of public resources to primary and higher education bears a much weaker relationship with overall sector resource mobilization (SRM) than with the primary enrollment rate. Concern for the issues at hand is somewhat stronger, however, in high SRM countries than in low ones. Consistently, the hignest proportion (90 percent) of reports with explicit reference to an excessive allocation of public resources to postprimary education is among the category of countries that combine a comparatively high SRM with a low PE, which indicates inefficiencies in the management and intrasectoral distribution of sector resources.

3.23 Five of the nine reports that do not take a position on this issue are from coLntries that combine a low SRM1 with a high PE, that is, countries where sector financing between public and private sources at the primary level may be distributed inequitably (Cameroon, Malawi, Nigeria, Tanzania, Colombia).

27
**Table M2: Intrasectoral Allocaion of Sector Resources** (Percentage of reports in each category)

|Country Groupings|Insufficient<br>Allocation to<br>Primary<br>Education|Excessive<br>Allocation to<br>Higher<br>Education|No<br>Assessment|
|---|---|---|---|
|Low PE (17)|71|77|12|
|High PE (19)|26|53|37|
|Low SRM (20)|40|60|30|
|High SRM (16)|56|69|19|
|Total (36)|47|64|25|

Note: Parantheses indicate the number of reports in each category.

3.24 Judgments in the reports about the allocative equity and<sup>efficiency of</sup> government spending on the respective levels of education<sup>are based on two types of</sup> criteria: (i) the distribution of the sector budget (recurrent, capital,<sup>or total) relative to the</sup> corresponding distribution of student enrollments among the various<sup>education levels; (ii)</sup> the ratio of public expenditures per student at the various levels<sup>to unit expenditures at the</sup> primary level, or to per capita GNP. In both approaches, regional<sup>comparisons sometimes</sup> complement the analysis. Neither approach explicitly considers<sup>internal efficiency or quality</sup> differences between the various levels and types of education.<sup>As a result, assessments of</sup> the adequacy of the intrasectoral allocation of the education<sup>budget, even though well-</sup> intentioned and seemingly rational, all reflect a varying degree of<sup>arbitrariness.</sup> 3.25 As an example of the first approach, both the Burkina Faso and<sup>the Senegal</sup> reports consider the intrasectoral allocation of public resources<sup>skewed in favor of higher</sup> education. Burkina Faso allocates 32 percent of its education<sup>budget to higher education;</sup> Senegal, only 19 percent. But higher education serves about 1.5 percent<sup>of the total student</sup> population in Burkina Faso, and close to 2 percent of it in<sup>Senegal. Both countries</sup> combine a high degree of sector resource mobilization with a low<sup>primary enrollment rate.</sup> Whereas the diagnosis of a misallocation of sector resources may<sup>appear intuitively credible</sup> in the case of Burkina Faso, it is less so for Senegal, where the<sup>overriding issue might be</sup> the inefficient use of resources at all education levels.

3.26 A few of the reports appeared to advocate reallocating resources<sup>to primary</sup> education solely because of the distribution of the education<sup>budget, not because of the</sup> corresponding distribution of enrollments. Among the countries advocating such a 28
reallocation, the share of primary education in the recurrent sector budget varies between 33 percent and 69 percent. These examples illustrate the inherent weaknesses of the approach. The fact is that there are few operationally meaningful comparative standards, at least at such an aggregate level of analysis.

3.27 In the second approach, the analysis is in principle more refined, and its outcome potentially more credible, since it focuses directly on the beneficiaries of government spending. Even then, however, most reports remain essentially concerned with expenditures per student at the different educational levels, rather than focusing on actual unit outlays for basic educational necessities, and on the extent to which minimum requirements are being satisfiedY Again. comparing PER assessments across countries provides a striking picture of the lack of credible comparative standards in the sector (see table 111.3). According to the PERs for which unit expenditure data are available on a more or less comparable basis (16), the ratio of unit expenditures in higher education to unit expenditures in primary education ranges between 6 (Philippines) and 208 (Tanzania)Y For most countries represented in this range, PERs conclude that spending on primary education is insufficient; yet public expenditures per primary student for these countries ranges from a low US$14 (Zambia) to as much as US$142 (C6te d'Ivoire). Clearly, comparison of expenditures per graduate, rather than per student, would be more meaningful.

3.28 A more fundamental problem with calculations of unit expenditures per student or graduate is that recurrent government spending on education is almost exclusively wages and salaries for teaching and nonteaching personnel. Teachers� incomes are inherently noncomparable across countries, and even within a country's civil service wage structure, because of the large variation in educational requirements, opportunities to earn outside income, teaching load, teaching hours, and so on. More useful tools for crosscountry comparisons would be the ratio of costs per graduate to GNP per capita, nonsalary expenditures per graduate (or even per student) on materials and supplies, or the ratio of nonsalary to salary expenditures per unit of output (graduate or student). Indeed, the Bank has recently recommended increasing nonsalary recurrent expenditures by US$5 per student in low-income countries and US$4 per student in lower-middle-income countries. Research has shown that investment in quality-enhancing inputs boosts student learning and can reduce dropout and repeater rates, thereby yielding significant cost savings.�-1 �-"Satisfaction of minimum educational input requirements is actually being assessed, or touched upon. in many reports with respect to primary education. but very seldom for the higher levels. The assessment thus does not play an integral role in the analysis of intrasectoral allocation issues.

�'Most reports refer to 'unit costs," which may or may not cover private costs, capital costs, or both. In fact, in most cases, unit costs appear to be limited to government recurrent expenditure (often budgeted rather than actual).

6-1 Marlaine E. Lockeheed and Adriaan M. Verspoor, Improving Primary Education in Developing Countries, The World Bank. 1990, p� 122-3 (draft).

29
Table 1113: Public **Recuent** E nditures per Student in Primary and Higlher Education

|Country|Year|Primary<br>US$|Higher<br>US$|Ratio o<br>Primary|f Higher to:<br>GNP per capita|
|---|---|---|---|---|---|
|Botswana|(84)<br>|97<br>|4,887<br>|50<br>|4.7<br>|
|Burkina Faso|(85)|43|1,989<br>|46<br>|10.5<br>|
|Costa Rica|(86)<br>|134<br>|1,435<br>|11<br>|.9<br>|
|Cote d'Ivoire|(85)|142<br>|3,703<br>|28<br>|_5.0_<br>|
|Ghana|(85)|38|3,095<br>|81<br>|7.9<br>|
|Lesotho|(86)|23<br>|3,527<br>|153<br>|9.5<br>|
|Mali|(88)|65|1,161|18<br>|_5.5_<br>|
|Niger|(86)|104|2,412|23<br>|9.3<br>|
|Nigeria|(85)|73|4,834|66<br>|13.1<br>|
|Pakistan|(84)|24|184<br>|8<br>|.5<br>|
|Philippines|(86)|44|258<br>|6<br>|.4<br>|
|Rwanda|(86)|52<br>|4,458<br>|86<br>|14.9<br>|
|Tanzania|(86)|18|3,740<br>|208<br>|20.8<br>|
|Turkey|(84)|49|609<br>|12<br>|_.5_<br>|
|Zambia|(86)<br>|14<br>|2,162<br>|154<br>|8.6<br>|
|Zimbabwe|(85)|93|2,391|26|4.1|

Note: In principle, the numbers in this table represent recurrent<sup>govermnent</sup> expenditures per student in public institutions (see footnote 2).

3.29 In some cases, reports also base their judgment<sup>on recent trends in the</sup> distributional pattern of government education expenditures.<sup>Thus, an increase in the share</sup> of higher education in the sector budget at the expense<sup>of primary education is taken as</sup> further evidence of a misallocation of public resources.<sup>However, just as a decline in civil</sup> service wages relative to the price of nonpersonnel<sup>expenditures may lead to a</sup> nondiscriminatory reduction in the share of education in<sup>total expenditures (see box III.1),</sup> the same tendency also holds with respect to intrasectoral<sup>resource distribution. A decline</sup> in wages will therefore tend to raise the share allocated<sup>to higher education, a material-</sup> intensive and capital-intensive subsector, and to lower the<sup>share to primary education, the</sup> most labor-intensive subsector.

3.30 Evidently, no single indicator suffices in providing a valid assessment<sup>of the</sup> "appropriateness" of the intrasectoral distribution of government<sup>education expenditures.</sup> Unless sector output goals are clearly defined, and process<sup>efficiency analyzed, judgments</sup> remain at best tentative.

30
# D. Management of Sector Resources

3.31 All reports except two (Mexico, Zimbabwe) refer to inefficiencies in the management of sector resources that impair the cost-effectiveness of the education system. Three types of wastage are encountered: (i) imbalances in the distribution of sector resources among various expenditure categories; (ii) low internal efficiency, largely reflected in low student promotion and retention rates and suboptimal student/teacher ratios; and (iii) low external efficiency, reflected in poor labor market outcomes for graduates. The first two factors tend to raise operating costs per student or per graduate, reducing the educational outcome obtainable for a given level of sector resources, while the third reduces the economic returns from educational investments.

3.32 Internal and external efficiency have been addressed in the context of sector priorities (chapter II. E.), and the lack of integration between these two sets of issues and the analysis of sector costs and financing has been observod in the preceding sections of this chapter. This section focuses on the first, more narrowly der Ad category of resource management issues. It will review in particular the treatment ot recurrent versus capital expenditures, and of personnel versus nonpersonnel expenditures.

3.33 Recurrent versus capital expenditures. Seven reports cover only the recurrent or only the capital budget. With one exception, all these reports were published before 1988. All the others cover both budgets, although the depth of analysis varies greatly. Broadly speaking, 23 reports compare the share of the sector budget allocated to recurrent and capital expenditures. Among these, the share of recurrent expenditures varies between wide margins (55 percent to 99 percent).

3.34 Definitions and coverage vary greatly. Capital expenditures are found under the heading of the capital, development, or investment budget. More importantly, these budgets may or may not include foreign financing; reports do not always make this clear. In most cases, nonrecurrent budgets include some de facto recurrent outlays. Few reports analyze the details of these budgets to identify "true" capital outlays, and, within that category, the part of investment in capacitv expansion versus capacity rehabilitation. The capital costs generated by the absence of maintenance and repair of equipment and facilities (that is, by the shortage of recurrent funding) thus receive little attention.

3.35 Nine reports conclude that capital investinent needs are underfunded. Five of these state only that the part of sector resources allocated to capital expenditures is small or declining (Bolivia, Costa Rica, Peru, Kenya, Mali); another three recommend increasing the level, though not necessarily the share, of capital expenditures (Colombia, Guatemala, Turkey). The Madagascar report advises increasing capital investment in primary education through reallocation of resources from secondary and higher levels.

3.36 Ideally, in a PER context, one might expect an analysis of the sector investment program and its recurrent cost implications or, in a more normative approach, the identification of a "core" investment program, the recurrent cost implications of which can be met from the projected increase in sector resources. Fourteen reports, including eight multisector PERs, do not cover the sector investment program at all. Thirteen reports 31
describe public investment plans, or at least they estimate future sector investment. Few of these, however, address the recurrent cost impiications. Only nine reports define a specific core investment program or recommend cutting the governrment program to bring incremental recurrent costs within sustainable limits.

3.37 As is well known, the education sector has extremely high recurrent/capital cost ratios. For most countries undergoing fiscal stabilization and economic restructuring, sector resource constraints are a major impediment to expanding access to education, largely because the operating cost of simply maintaining current enrollment capacity, not to speak of quality, has gradually eroded all domestic resources previously available for capital investment. For the same reason, foreign support for capital investment has been stagnating, except where donors have agreed to provide additional financing for recurrent costs. Where confined to capital investment, foreign aid has generated incremental recurrent costs that exceed domestic financing, resulting in underused or unraintained facilities, or it has concentrated on the rehabilitation of facilities and equipment.

3.38 Regardless of the level of sector resources, imbalances between capital and recurrent expenditures compromise the efficiency of resource management and the effective mobilization of external financial commitments. The sustainability of past achievements is threatened, and future development is jeopardized. Under these circumstances, the cursory attention devoted in many education PERs to the appropriate balance between capital and recurrent expenditures is worrisome.

3.39 About two-thirds of those reports that emphasize trade-offs between capital and recurrent expenditures are concentrated in low SRM/high PE countries, where the burden of maintaining a high level of sector activity under global resource constraints tends to sharpen such trade-ofifs. When resources are limited but the need for them is growing, there is intense pressure to increase internal efficiency. Allocative inefficiencies--such as large capital expenditure program. (for example, for school construction in response to growing numbers of school entrants) with insufficient allocations for operations and maintenance--become more costly. Examples of good practice in this context are the Malawi, Rwanda, and Haiti reports; only Malawi and Rwanda apply the concept of recurrent/capital cost ratios (see box III.4).

3.40 Personnel versus nonpersonnel expenditures. Two-thirds of the reports (again concentrated in countries with a low level of sector resource mobilization, but a high sector output) express concern about the distribution of personnel and nonpersonnel expenditures in the recurrent budget. All of these reports mention insufficient spending on educational materials and supplies as an issue affecting the quality of education, but only half provide actual figures. The usefulness of this information for comparative purposes has already been noted (para. 3.28). Fifteen reports mention insufficient spending on maintenance of education facilities (4 with underlying data).

3.41 Teachers' salaries. Concern about teachers' salaries is highest in countries with the opposite set of indicators: a high ratio of education spending to GDP but poor output. This combination indicates inefficient resource use, and the largest component of education spending is wages. It is, however, extremely difficult and probably not useful to generalize 32
further about the treatment of sectoral versus government-wide wage structures in PERs. The salaries of primary teachers vary greatly as do the requirements, such as number of teaching hours and students per teacher. Many reports use available data to estimate either a time trend of real income for teachers, or a static or dynamic measure of income to per capita GNP.

3.42 Although personnel costs generally absorb too much of the recurrent budget, 10 of the 15 reports that explicitly refer to teachers' salaries recommend increasing them. Only eight reports cite actual figures for teachers' salaries.

3.43 Links between staffing and remuneration issues and the macroeconomic perspective are weak or nonexistent in most reports. There are a few exceptions. The following countries recommend policies that would raise salaries wiL..out increasing spending1 in the face of macroeconomic constraints: Bolivia and Haiti, by eliminating ghost employees and redundant positions; Ghana, by raising student/teacher ratios; and Lesotho, by implementing a wide range of cost-efficient measures at the university level. Otherwise, 5 of the 10 reports that recommend higher salaries for teachers make no comment about the feasibility of the proposal given the overall budget situation. Moreover, two of these (Costa Rica and Cameroon) also contain global recommendations about tight control of public sector wages as a means of reducing recurrent expenditures.

3.44 Few reports analyze changes in teachers' wages in the context of the civil service wage and employment structure. One exception is the Kenya PER, which states that because 40 percent of Kenya's civil service are teachers, the proposed elimination of the government's guarantee of employment for all university and teacher training graduates will not have a sector-neutral impact (see box 111.1). It will have a disproportionately large (and positive) effect on the skilled-labor-intensive education sector, raising the student/teacher ratio above its present level and facilitating the transfer of resources from wages to materials expenditures.

3.45 There is tremendous variation in the coverage of economic forces and policy choices that affect education. A particularly critical area is wage and incomes policy. Adjustments to teachers' salaries relative to those of other civil servants must be addressed with regard to the macroeconomic constraints. Likewise, the consequences of adjustments in the civil service wage structure must be analyzed at the sectoral level. Analysis of budget items providing information on macro/sector links and assessment of outcomes for proposed reforms vary greatly among reports, often reflecting data availability and budgetary transparency. All of these areas need to be strengthened. The first best solution is to allocate Bank resources to ex ante sector work that could provide the data rather than to PERs that are forced to finesse this critical link.

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# Box 1A4: **Balaning Investment and Recurrent Spending:** _R,cure,nt/Capital_ Cost **Ratios in MalawNi and Rwanda**

Throughout thle developing world the productivity of investment programs has been jeopardized by the failure of governrments to provide adequately for their operation and maintenance over time. "R" coeffic-ents, equal to the ratio of incremental recurrent expenditures required by investment expenditures to total investment expenditures, can be a useful tool in predicting recurrent cost needs and evaluating the adequacy of recurrent expend,tures historically.

The Rwanda PER estimates "r" coefficients for education projects in order to predict recurrent costs of the planned investment in various levels of education. The following conclusions emerge: (i) the primary education "r" coefficient compares favorably with those for similar countries;tJ (ii) when recurrent costs are estimated in the requests, they are noticeably underestimated; and (iii) the future demand on budgetary resources by each level of education will far exceed resources, as well as the financial capacity of the sector.

Malawian authorities estimated "r" coefficients for education subsectors, based on projected recurrent costs of individual investment projects: Primary schools 0.18 Teachers' Training College 0.06 Secondary schools 0.13 Distance Education 0.06 The weighted average of the coefficients (0.12) is much greater than the sector's "r" coefficient derived from actual spending during the 1983/84 to 1987/88 period (0.03). The discrepancy between projected and actual "r" coefficients indicates acute underfunding of recurrent costs necessary to service education sector investments (4 MK million spent versus 15 MK million required).

The magnitude of recurrent costs associated with projects tends to differ greatly across sectors as well as subsectors. Nevertheless, "r" coefficients can provide essential information on the recurrent cost implications of proposed investment spending.

a;'Education sector "r" coefficients for a restricted sample of developing countries are reported in Peter Heller, "The Underfinancing of Recurrent Development Costs," in Finance and Development, March 1979.

Slrcg.s: "'alawi: Public Expenditure Review," Report No. 7281-MAI (February 10, 1989); and "Rwanda: Public Expenditure Program: An Instrument of 1<sup>j,</sup> oomc Strategv,' Report No. 7717-RW (October 19, 1989).

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# **IV. SECrOR FINANCING STRATEGIES**

4.01 This section reviews the explicit and implicit sector financing<sup>strategies in</sup> education PERs. The inherent logic of these strategies<sup>is assessed through comparative</sup> analysis on the basis of the country typology, taking<sup>into account the macro and sector</sup> situation. Macro and sector diagnoses and strategies<sup>are, by necessity, highly synthesized.</sup> The macroeconomic situation--growth in<sup>general and public finance in particular--is</sup> diagnosed as improving, stable, or deteriorating (see figure<sup>11.1). Sector financing diagnoses</sup> and strategies relate to the overall allocation of government<sup>resources to education, the</sup> distribution of these resources among subsectors,<sup>and the efficiency of sector resource</sup> management. All the outcomes of this comparative<sup>analysis, selectively reported in this</sup> chapter, are included in annex IV. Sector strategies<sup>by country typology are presented in</sup> figure IV.1.

Figure IV.1: Sector Financing Strategies <!-- Start of picture text --> % of countries in each category<br>100 --<br>80 -. -r.................<br>Categories<br>4 0 A.LL..........<br>5~~~~~~~~~~~~~~~~~~~~~~~~ Dt I t 0 H U iqh yl PE s<br>2 0 -. .. ...... m... Low PE<br>Hiqh SRII<br>OLDLow SRfl<br>Increase govIt spend A Sector Financing~~~~~~~~~~~~~~AlOverall increase efficiency<br>Red istribution Tap new sources<br>Sectoi Financing Strategies<br><!-- End of picture text --> A. Overall Sector Financingz 4.02 Eighteen countries are advised to increase<sup>government spending on education.</sup> In all but three reports, the sector is explicitly<sup>diagnosed as underfinanced. In nine reports,</sup> 35
the recommendation relates to the amount of the government budget allocated to the sector; only the Turkey report specifies from where the reallocation is to come. In four cases, the recommendation is for an increase in sector expenditures relative to GNP, thus implicitly safeguarding the desired outcome against deterioration in the efficiency of overall public resource mobilization. In the remaining five cases, the report simply advocates an increase in real expenditures on education, and the outcome in terms of the intersectoral allocation of public resources remains undetermined.

4.03 In eight of these eighteen countries, the economic situation is described as improving, hence facilitating the implementation of the recommendation; the economy is considered stable in another five countries. The Cameroon, Lesotho, Malawi, Nigeria, and Peru reports advocate increasing public spending on education even though the country is facing difficult times. In Peru, the increase is considered essential "for social and political reasons" for the attainment of other development goals, and the report states clearly which sectors should be targeted for reallocations. The Nigeria report finds that the quality and equity of education and the condition of the physical plant have deteriorated so much that increased public spending on education is essential in spite of resource constraints. In all 18 countries, new sources of financing or cos: recovery measures are recommended.

4.04 When grouped by the country typology (see table IV.1), 15 of the 18 countries for which increased government spending on education is recommended indeed have a low rate of sector resource mobilization, representing three-fourths of all countries in that category. For the remaining five low SRM countries, PERs recommend maintaining the relative level of government spending.

Table IV.1: Sector **Financing** Strategies: Public Resource Allocation (Percentage of reports in each category of countries)

|Country<br>Category|Increase Allocation|Maintain Status Quo/<br>No Recommendation|
|---|---|---|
|Low SRM (20)<br>High SRM (16)|75<br>19|25<br>81|
|Low PE (17)<br>High PE (19)|47<br>53|53<br>47|
|Total (36)|50|50|

Note: Parantheses indicate the number of reports in each category.

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4.05 In six of the low SRM countries for which increased govermment spending is advocated (Cameroon, Guinea, Malawi, Mozambique, Nigeia, and Turkey), sector resources are constrained by a relatively low budget allocation. In another three countries (Guatemala, Colombia, Peru), public resource allocation to the sector is high, and the constraint lies in the low level of public resource mobilization. In the remaining countries (Bolivia, Haiti, Mexico, Pakistan, Bangladesh, Sierra Leone), both factors combined depress the sector resource situation.

4.06 The pattern of PER recommendations for increased government spending on education appears to be unrelated to the primary enrollment rate. Positive recommendations are made for 53 percent of the high PE and for 47 percent of the low PE countries. The highest proportion of positive recommendations is recorded for the low SRM/low PE subcategory (86 percent), followed by the low SRM/high PE group (69 percent). In countries where public resources for education are relatively low and the primary enrollment rate is high, sustainability of the sector activity and equity in the distribution of its cost burden may require a higher level of government financing.

4.07 None of the reports recommends a reduction in the level of government spending on education, not even for high SRM countries. Thirteen of the sixteen countries in this category recommend maintaining that level, or they do not commit themselves on this particular issue. In only three high SRM cases (Costa Rica, Ghana, Lesotho) is an increase in government spending recommended. Lesotho's SRM position reflects a high level of public resource mobilization (22 percent) rather than of sector resource allocation (16 percent), whereas Ghana's situation is the opposite (15 percent and 24 percent respectively). While increased spending seems feasible in Lesotho, it may be a response to high demand for secondary education since the country already has universal primary education. In Ghana, increased spending on education is understandable in view of the sector's low primary coverage, but it may not be sustainable.

4.08 Most of the countries that advocate no change in education expenditures have a high level of sector resource mobilization (13 of the 16 reports in the high SRM category compared with 5 of 20 reports in the low SRM category). A tendency to maintain the status quo thus prevails when sector resources are relatively abundant. Even though this tendency is natural from a sector perspective, it may merit closer scrutiny irn some cases.

4.09 The PER for C6te d'Ivoire acknowledges that education's share of the government's recurrent budget is among the highest in the world (42 percent in 1985), but it fails to formulate a spending recommendation even though the economic and public finance situations are described as deteriorating. The report does advocate various costsaving and recovery measures, all of which will benefit primary education, which has a low enrollment rate, rather than the general budget. Zambia, on the other hand, has a rather low budget allocation to the sector (8.3 percent) and an economy that apparently is l/Nigeria, though highly indebted, is not strictly speaking a low SRM country if education financing by the states is added to the federal sector budget.

37
improving, yet the PER does not explicitly favor increased government spending on education.

B.

# The Intrasectoral Allocation of Government Resources

4.10 Most reports recomrnend changes in the intrasectoral allocation of government expenditures--usually more money for primary education. Reports advocate either direct redistribution or cost recovery measures at the postprimary (mainly postsecondary) level. Restrictions on the growth of postprimrary, principally university, enrollments are recommended in 11 reports. Cost recovery is to be achieved by introducing or raising user fees (20 cases) and, to a lesser extent, by reducing subsidies (13 cases). Five reports explicitly indicate that the proceeds of the cost recovery measures should be reallocated to primary education. In most other cases, one has to assume that these proceeds remain in the subsector, hence that redistribution is indirect.

4.11 Consistent with the desire to alter the distribution of public expenditures in favor of primary education, none of the reports advocates cost recovery at that level. Many reports, however, recommend that additional sources of primary education financing be identified and exploited. Expansion of the private school system (proprietary or sponsored by a nongovernmental organization) is encouraged in 17 reports, and contributiors solicited from local communities and parent associations, mainly for primary school construction and maintenance, are proposed in 6 reports. The Nigeria report advocates the imposition of a development levy on households for the financing of primary education.

4.12 Although not directly related to the intrasectoral distribution of the education budget, such measures have an indirect redistributive effect on it. Whether this effect is consistent with the underlying intrasectoral reallocation philosophy remains, in most cases, an unanswered question. This omission may be of particular concern where the recommended measures amount to de facto prirmary cost recovery, such as direct contributions from communities and parents.

4.13 Recommendations usually are made after the equity of the distribution of sector resources has been assessed. In seven cases, however, cost recovery or reallocation measures are advocated without a clear prior assessment of the situation. PER emphasis on intrasectoral reallocation strategies is understandably stronger in low PE countries than in high PE countries, but it does not seem to bear much relationship to the sector's resource situation. Quite consistently, however, high SRM/low PE countries favor reallocation. The imbalance between the supply of public resources to the sector and the primary enrollment rate calls for increased attention to intrasectoral allocations, both on equity and efficiency grounds.

# C. Sector Resource Management

4.14 All together 30 PERs make concrete recommendations about sector resource management. Characteristicaily, four of six PERs that do not take a stand on sector resource management issues cover high SRM countries, two of which also have a relatively low primary enrollment rate (Central African Republic, Costa Rica). Recommended 38
strategies entail direct cost-saving measures (for example, less costly teacher training, lower teacher qualification standards, a shift of teachers from higher to lower education levels, lower school construction costs) or indirect savings through efficiency improvements (for example, more intensive use of teachers and facilities and higher student promotion rates).

4.15 Few of the reports acknowledge that increased efficiency of educational processes usually requires prior investment in quality improvements, the incremental costs of which initially outweigh the resulting savings. Furthermore, it is often unclear from the recommended efficiency measures whether realized savings are to remain within the subsector or to be reallocated to another subsector. Consequently, the ultimate effect of such measures on the intrasectoral distribution of the education budget remains undetermined, even though the equity of this distribution is a stated area of concern.

# D. Overall Assessment

4.16 With a few exceptions, the financing strategies emerging from PERs are rooted in an explicit, though sometimes equivocal, sector diagnosis. As far as the overall level of government spending on education is concerned, recommendations are not always consistent with the global economic assessment.

4.17 Many PERs fail to follow up on the sector diagnosis with concrete policy options. This "non-commitment" phenomenon is concentrated in countries that spend quite a lot on education. Countries with a comparatively low level of sector resource mobilization favor strategies to reallocate resources and to improve the efficiency of resource management.

4.18 The logic of this difference between high and low SRM countries is evident: the more severe the sector resource constraints, the greater the need to find ways to do more with available resources and to tap new sources of financing (including cost recovery). But the implicit corollary--namely that efficiency and equity of resource use deserve less attention in countries with more generously endowed education sectors--is less evident. There seems to be an assumption that the share of education in the total budget i- more or less fixed, or at least is much more rigid than is the structure of the sector budget. Without much justification, the focus is cn intrasectoral rather than intersectoral reallocations of resources.

4.19 The recommendations in PERs for increased resource allocations to the education sector or to a subsector are incomplete without a clear and realistic analysis of the source of these resources. If intrasectoral or intersectoral reallocations are proposed, the PER should justify the transfer of resources within or to the education sector relative to other sectors or subsectors.

4.20 Crosscountry analysis confirms the need for a country typology linking sector financing and output criteria. The crude typology adopted for this review proved useful in identifying exceptions and borderline cases that deserve closer scrutiny. Two subsidiary conclusions emerge from the use of this typology in the present context: 39
(a) Sector financing issues and related strategies are relatively obvious in countries where the level of public spending on education and the sector output are both high or both low. Issues and strategies are more complex when there is an imbalance between the two criteria (for example, a high level of government funding and low sector output). In these cases, the interrelated issues of quality, efficiency, and equity become predominant.

(b) When assessing the adequacy of the government's financial commitmen **t** o education, it is useful to distinguish between the effect emanating from the relative size of the public budget and the proportional allocation of these resources to the sector. Where the first factor is the overriding constraint on the supply of resources, the feasibility and sustainability of the views held in a number of PERs seem questionable, at least in the absence of a more integrated treatment within the macroeconomic framework.

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# **V. METHODOLOGY**

5.01 The education sector is widely recognized as critical for development. It also consumes a large share of government fecurrent expenditures. Therefore, any unevenness of analysis or imbalance in recommended strategies among sectors in PERs is a cause for concern. This section reviews the comprehensiveness of sector coverage, the information and methodology incorporated into the sector analysis, and institutional issues.

A. Sector Coverage 5.02 Prior sector experience. All but 10 reports (all of them multisector) refer specifically to the participation of an education sector specialist on the PER mission(s). Only 56 percent of the reports state that they are building upon Bank experience in the country; and most of these refer to previous Bank studies or other public expenditure or education sector studies. The other reports do not place themselves explicitly in the context of prior CESW by the Bank.

5.03 Comprehensiveness of sector coverage. All of the single-sector and two-thirds of the multisector reports cover the entire formal education system, although the emphasis varies. For example, the Bolivia report concentrates on the primary level, ' Tunisia report on the primary and secondary levels, and the Colombia report on primary and higher educationY1 Vocational and technical training was mentioned in two-thirds of the reports, including all but one of the single-sector reviews.

5.04 Data. All reports except that of the Central African Republic use government data sources, and 28 use Bank-generated data. The Bank data are commonly presented as an addendum or corrective to incomplete or inexact country-generated statistics. In some cases (for example, Niger), Bank spending estimates differ from government budget estimates because of different methods of measuring costs. In other cases, exact estimates are impossible because of ambiguities. In Mozambique, many foreign-financed education projects are not in the budget, and in Pakistan, the extent of federal and provincial costsharing is unclear. Several reports point to inconsistencies in government data. For example, the statistics from one ministry contradict those of another, or subsector expenditures do not add up to the sector total. Half of the reports refer to necessary data (particularly on the wage structure and on unit costs per student) that are not available.

5.05 Single-sector versus multisector reports. The 8 single-sector and 28 multisector reports **in** the sample are only partially comparable because of their different emphases. First, the single-sector reports include more complete data on education (enrollment and repeater rates, unit cost data, breakdowns of information by level of education, and so on). They also provide better analysis of data--which data are inconsistent or missing, and more detailed information on how estimates are derived. Second, they analyze sector issues and priorities in more detail (specific inefficiencies by level of education, intrasectoral !JReports that focused exclusively on a single level were excluded from the review.

41
allocations and misallocations). Third, they more frequently include information on the government's strategy for the sector. When a sector financing model is used, the tradeoffs often reflect the government's explicit priorities. One problem area that is highlighted much more consistently in single-sector reports is the insufficiency of funds allocated to materials and maintenance. This imbalance exemplifies the type of budgetary underfunding or misallocation that is often not apparent from the macro perspective. Fourth, the singlesector reports cite a wider variety of objectives for the education sector. Fifth, they often discuss the social consequences of education reforms. Finally, single-sector reports are more often developed within a long-term (to year 2000) framework. Yet the detailed sector work in single-sector reports is often presented in a macroeconomic near-vacuum.

5.06 Multisector PERs treat more thoroughly than do single-sector PERs the macroeconomic strategy, the effect of education reforms on the public budget, intersectoral trade-offs, dangers to the sustainability of reforms, and questions of political and institutional feasibility. More frequently than single-sector PERs, they use Bank-generated data rather than government data and government planning documents rather than actual expenditures. Because the PER is often a tool for the projection or analysis of a mediumterm expenditure program, the multisector reports focus on reforms that can be implemented within three to five years. Multisector reports also tend to refer to underlying sector studies or other Bank experience in the country. Single-sector reports rarely do because they usually precede any non-project involvement of the Bank in the sector, and they reflect either the initial sector work or an update after a lapse of several years.

5.07 In spite of the commonalities described earlier, there is great diversity of coverage among PERs. Although the reports serve different purposes at different stages of the Bank-country dialogue, greater standardization of coverage, format, data, and data sources is advised.

# B. Coverage of Education Financing

5.08 A major problem for the analyst is not knowing what portion of total education financing is represented by the public budget allocated to the relevant ministry. Three specific questions need to be answered:

# a) Are there significant nongovernment sources of education financing?

b) Are there significant public sources of education financing that do not appear in the central government's budget?

c) Are there significant central government sources of education funding that fall outside the line ministry?

5.09 Nongovernment sources of education financing. Reports cite two types of nongovernrent funding of education: private funding by beneficiaries (or their families), businesses, NGOs, religious organizations, or other groups; and private or public financing by foreign countries. The role of the private sector in the financing of education is described in 60 percent of the countries reviewed. Twenty reports describe private schools, 42
most commonly at the primary and secondary levels. Although most private schools are operated for profit, seven reports mention that nonprofit religious organizations provide education.

_5.10_ Another form of private sector education funding is user fees, mentioned by nearly half the reports. Eight reports describe school fees levied for tertiary education. School fees at lower levels of education are mentioned primarily for East Africa. Kenya and the Philippines charge fees at the secondary level, Nigeria and Zambia at the primary and secondary levels, Rwanda and Tanzania at the primary level only, and Zimbabwe for primary and vocational schools. Lesotho has user fees for primary, secondarv, and vocational education. Ghana charges for textbooks and school materials at all levels, but these fees are symbolic rather than real because they recover only about 1 percent of actual costs for materials. African parents in particular contribute to their children's education by providing school materials such as books and uniforms or by helping to build, maintain, or operate school facilities.

5.11 A great deal of confusion about the role and advisability of user fees exists. Much of the confusion is the result of a partial equilibrium analysis that reflects a lack of adequate data. Information about the ability or willingness of the administrative apparatus to collect fees is often scarce. Almost all reports that discuss user fees mention the equity and access implications--both positive and negative--but they do not incorporate the sector expert's intuitive assessments into a general equilibrium analysis of the budgetary tradeoff between user fees and scholarships, or the effect of cost recovery on the demand for education, for example. Although exceptions exist (see below under social and equity issues), the treatment of user fees, while necessarily situation specific, leaves too much room for subjective interpretations based upon largely insufficient data.

5.12 A final nongovernment source of financing is foreign aid. Seventeen reports describe foreign financing for education projects. These reports are spread across all country groupings and report categories. Some reports cover foreign financing in detail, others subsume it into central government spending. In general, donor assistance focuses on the capital budget and provides little support for recurrent expenditures, except when they are hidden in the investment program, even of donor-financed capital projects.

5.13 The treme.idous variation in the treatment of foreign aid to education is a result of the different ways of treating it in the government budget. The Mozambique report notes that the country's investment budget includes considerable recurrent spending that is foreign financed. Recurrent expenditures are capitalized to attract donor support, which is usually not offered for explicitly recurrent items. But the report makes no attempt to quantify or track these hidden recurrent costs or to calculate the degree to which the capital and recurrent budgets are skewed by outside funding.

5.14 No expenditure items are cited for the foreign financing of education in Haiti, where it provides 30 percent of total sectoral spending; in Bangladesh, where 23 percent of primary, 6 percent of secondary, 54 percent of vocational, and 15 percent of university spending is provided by foreign donors; or Rwanda, where 1.6 percent of the recurrent budget is foreign financed. No figures are given on foreign aid to education in Honduras, 43
Mozambique, Niger, and Burkina Faso, although the reports mention that it is significant. Little coherent analysis of this important item is possible unless all foreign inputs into the capital and recurrent budgets are itemized.

5.15 Local government financing of education. One-third of the reports mention local government financing of education. Here again, the large disparities in the treatment of the role of the local government in education are because of administrative or budgetary opacity. It is not always clear whether the local authorities are distinct revenue-generating and decisionmaking bodies with regard to education, or whether they are merely recipients and administrators of central govermnent pass-throughs. The role of local administrations should be clarified.

5.16 Other central government financing of education. Twenty percent of all reports cite extrabudgetary spending as a result of balanced budget requirements, off-budget earmarked funds, special foreign currency accounts, and so on. Eight reports briefly describe the role of government ministries other than the Ministry of Education in sector financing. Vocational training, building construction, and maintenance are functions that often fall outside the purview of the Ministry of Education. In addition to budgetary contributions from specific ministries, education may be funded from other public financing sources (see box V.1). Too narrow a focus in the sector financing analysis may lead to underestimation of the public resources allocated to the sector and to distortions **i;a** the assessment of how they are distributed.

5.17 In general, vocational training programs are small, and the exclusion of figures for them in a functional education budget, while distorting, is not critical. The same cannot be said for operations and main.enance costs. In many countries, it is difficult to determine what percentage of expenditures by the public works or other relevant ministry is functionally linked to education, and these amounts can be substantial. In Guatemala, most capital investment in education is financed by the Ministry of Public Works; in Peru, over half of all school construction is funded by the National Development Corporation.

5.18 In only a few countries does a functional budget appear to be readily available or calculable, so some reports have gone to great lengths to approx1mate these costs.2/ Such efforts are necessary because the relegation of these largely capital costs to the budgets of other ministries clearly distorts the relationship between capital and recurrent financing needs in the sector. Increased attention to the development of functional, rather than administrative, budgetary categories is suggested.

Z/Tanzania's PER (1988), for example, lists recurrent and development budgetary expenditures by administrative categories (central government ministries) and by crossministerial end-use categories (general administration, public safety, sanitation, education, and so on). These categories are only partially comparable, and the creation of a workable functional budget depends upon detailed knowledge of budgetary categories.

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# **Box V.1: The** Education Budget **in** Mali

Mali's public budget has three main components: the national budget, the regional budgets, and special accounts (budgets annexes). The national budget, in turn, has three categories: ministries; "general outlays" (charges communes), essentially subsidies and transfers; and equipment. Capital expenditures figure mainly under the equipment rubric, but they are included in some of the ministerial budgets. The equipment budget also includes a substantial portion of recurrent expenditures.

Education expenditures, defined as those related to the formal education system managed by the Ministry of Education, are scattered in several places. It takes careful detective work to determine the true size and composition of the education sector budget. More than 80 percent of primary education is financed through the regional budgets. The "charges communes' rubric includes subsidies to private schools, as well as local and foreign transportation costs incurred by students, teachers, and Ministry of Education officials. The following table shows how the sector's recurrent budget is pieced together.

|1988 Pub|lic**Recurrent**Expe<br>Budget<br>|nditure on Edu<br>ary Source:<br>|cation**(FCF**<br>|**A mfi.)**|
|---|---|---|---|---|
|Subsector|Ministry of<br>Education_(@°!_|Charges<br> Cornmunes|Regional<br>Budgets|3[otal (To)|
|Primary Ed.<br>|415 (3.2)<br>|253<br>|3,154|3,822 (21.6)<br>|
|Secondary Ed.<br>|8,347 (64.0)<br> <br>|649<br>|--|8,996 (51.0)<br>|
|Teacher Training<br>|<br>853 (6.5)<br>|22<br>|--|875 (5.0)|
|Higher Ed.<br>|2,508 (19.3)<br>|539|--<br>|3,047 (17.2)<br>|
|Administration<br>|910f7.)<br>7.<br>|--<br>|3<br>|913 (5.2)<br>|
|Total<br>|13,033 (100.0)<br>|1,463|3,157|17,653 (100.0)<br>|
|Percentage of<br>|(19.4)<br>|||(26.2)|
|Total Recurrent|Budget||||

This example shows how seriously the government's financial commitment to education may be underestimated if the analysis is limited to the budget of the line ministry. In Mali, the line ministry represents 19 percent of total public recurrent expenditure, whereas the comprehensive sector budget accounts for 26 percent. More important, the sector budget shows a more rational intrasectoral distribution of resources, even if heavily skewed against primary education.

Snurce: Serge Cuenin, "Analyse des Depenses Budgetaires Relatives a I'Education", IREDU, September 1989 (background paper for MALI Education Sector Consolidation Project. IDA Cr. 2054-MLI).

45
C. Education Finance Models 5.19 Use of simulation models in the financial analysis of the sector has had beneficial results in terms of coherence, comprehensiveness, and interpretability of outcomesY Education finance models differ in structure and in sophistication. They all provide an accounting framework linking student flows, and sometimes teacher flows, to the various components of unit costs (such as teachers' salaries, administration, materials and supplies, maintenance). They then project sector financing requirements according to various assumptions about enrollment rates, efficiency improvements, cost-recovery measures, or other reform targets. The "resource availability" versior. of the model is driven by the budget constraint and solved for maximum feasible growth of student enrollments, and the "resource requirement" version is driven by student enrollments and solved for the required minimum sector budget.

5.20 Twelve reports use an education financing simulation model. Characteristically, use of this analytical tool appears to be frequent in single-sector reports (five of the eight reviewed), and infrequent in multisector PERs (seven of twenty-eight). It is also more freq-.ent for countries with a lowv level of sector resources (45 percent of the reports in that category) than for high SRM countries (19 percent). Five reports rely on the resource availability version of the model, another five on the resource requirement version. The iemaining two reports use both versions, projecting a "sector financing gap" that results from the difference between sector priorities and available financing (the budget constraint). Most of the reports present alternative scenarios that compare the costs of continuing current enrollment and internal efficiency trends with the cost and allocative implications of recommnended policy measures.

5.21 In the PER context, education financing models are a useful tool for strengthening the policy dialogue between the macroeconomist and the sector specialist, and ultimately between them and the gcvernment. More systematic use of this tool is greatly encouraged. The development of education financing models requires considerable initial investment in time and resources. Therefore, they should be undertaken as part of prior sector work.

# D. Structural and Institutional Issues

5.22 Planned versus actual expenditures. Twenty-five reports include actual education e,penditures as well as government planning documents. Nine reports cover only actual spending, and two reports (Mozambique and Senegal) consider only planned expenditures. Of the reports that compare planned and actual spending, half of them point to specific discrepancies--usually shortfalls.

5.23 The most complete treatment of this issue is in the Colombia PER, which provides a useful picture of a shortfall in actual expenditures on education directly l/See, for example, Manuel Zymelman, Education Finance Simulation Model, World Bank, 1987.

46
attributable to the national budget (see box V.2). The Lesotho report also analyzes the gap between planned and actual investments in education and finds several causes, most of which are institutional/procedural: overambitious targets, delays in donor funding, and weaknesses in project management. Other reports (Honduras's, for example) note that although overall expenditures have been below target, capital expenditures have exceeded budget levels. Inflation, cost overruns, and inaccurate forecasting are often cited for the difference between target and actual spending.

5.24 The budget process. All but six of the twenty-eight multisector reports discuss the budget process, and those that do not often refer to other country documents that provide such analysis. Only two of the eight single-sector reports discuss the budget process, and then only for the sector. The treatment of the budget process and its relevance to the cost and financing review varies tremendously. Some times the sector's budget is developed by the regions and then aggregated, and at other times the entire government budget is centr!-lly determined on an incremental basis--a process that prevents significant intrasectoral or intersectoral adjustments. Box V.3 presents a brief sketch of good practice in public expenditure planning in Botswana.

5.25 Some of the reports point to budget rigidities that make optimum allocations impossibie. In Colombia, for example, an oki system of earmarked taxes means that resources cannot be transferred among budgetary categories according to new priorities. In several African countries, all revenues go directly to the Treasury, so the Ministry of Education has little incentive to collect mandated school fees. In other countries, an apparently deliberate lack of transparency **in** budgeting facilitates a lack of accountability for actual outlays and for results.

5.26 The most common budgetary problem is poor coordination of the capital and recurrent budgets, resulting often in too much capital spending (on construction) relative to expenditures on supplies and maintenance. This imbalance can have particularly disastrous effects on the social sectors, where spending is overwhelmingly recurrent. About half the reports suggest budgetary reforms (setting expenditure priorities that integrate the budget with medium-term planning) to facilitate education sector reforms. In four countries (Ghana, Guinea, Kenya, and Madagascar), major budget reforms are under way. The principal objectives of Madagascar's 1988 budget reform are to increase the efficiency of allocations; to integrate the Public Investment Program and the recurrent budget in a consolidated process; to improve budget presentation and coverage; and to strengthen and streamline expenditure monitoring and execution procedures in order to imp! Zve control and accountability.

5.27 Social and equity issues. Sixty percent of reports discuss the social implications of proposed reforms (figure V.1). The discussion almost always focuses on improving equity and acce<sup>5</sup> s at the primary level. The percentage of reports that recommend improvements in equity or access is lowest in countries where the sector is weil funded (that is, high SRM countries).

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# **BOX** V2: The Budget Process in **Colombia**

In Colombia, the central govermnent has traditionally had little power and few legal or institutional mechanisms with which to manage public expenditure. The 1989 Colombia PER focuses on the budgetary process--why i, does not work well and how to gain control of it. After addressing the manageability of public expenditure and the earmarking of revenues, it discusses the three sectors (power, health, and education) that it finds require the most attention. It includes these sectors not only because they absorb large shares of government spending, but also because the budget process itself has impeded the implementation of the government's stated goals for the sector.

The annual budget process is criticized as a short-term exercise with little relationship to long-termn planning. Numerous rigidities--a constitutional requirement that the budget not exceed the previous year's budget by more than 10 percent, a requirement that the budget be formally balanced, and the extensive system of earmarked taxes--have contributed to the budget's irrelevance as an allocation and planning tool. As a result, planned income and expenditures often have little relationship to actual financing and spending.

From 1986 to 1988, total education expenditures (both capital and recurrent) not only failed to meet the planned targets, but actually fell in real terms. Although investment in primary education doubled over the period, it fell far short of the planned level, as did overall spending on primary education. On the recurrent side, nonsalary spending fell 45 percent in real terms in spite of government recognition of the importance of nonsalary education spending. Since 91 percent of education financing comes from the central government (with 4 percent from external credits and 5 percent from all other sources), the large shortfall in education financing is directly attributable to central government financing. (In 1988, education accounted for 19.1 percent of the central government budget rather than the planned 24.6 percent.) Although problems of fiscal planning and management remain, steps have been taken to rationalize the process. The report reviews these and suggests additional procedural and institutional measures. It also links a) macroeconomic and sectoral priorities with one another and with the institutional context, and b) the budget process and the actual fiscal outcome.

jaj: 'Colombia Public Expenditure Review," Report No. 7891-CO (green cover).

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# BOX **V3:** Public **Expenditure** Planning in **Botswana**

The analysis of Botswana's public expenditure plan in the 1986 PER is facilitated by a strong national accounts data base and the country's welldeveloped administrative apparatus. Preparation of the sixth National Development Plan (1986-91) began with the preparation of sector policy papers by each ministry. These documents presented the ministry's view on policy issues and on specific problems within its purview. The papers were discussed by the entire Cabinet of the government, and sectoral allocations of recurrent and development spending were made within the context of guidPlines for overall expenditure growth.

Once the recurrent and capital expenditure ceilings were fixed, ministries were asked to prioritize objectives within the budget ceiling. Spending on low priority activities was maintained constant in real terms. Departments providing services to the public were allocated increased resources at least consistent with the rate of population growth (3.7 percent). High rates of spending growth were determined for several sectors including education, reflecting the governrnent's stated commitment to basic education and to alleviating the economic constraint imposed by a lack of trained manpower. The recurrent cost implications of each project were spelled out, as were the recurrent cost implications of each ministry's investment program. Ceilings on capital expenditure limit only those projects with recurrent cost implications. Other self-liquidating capital expenditures were considered within the context of overall resource availability.

The Plan includes four budget scenarios, a base case and three less optimistic alternatives that are designed to test whether policy actions, in particular new revenue measures, would be needed under less favorable conditions. The Bank mission reviewed the scenarios and found that several of the assumptions of the base case had become less plausible over time. The Bank presented a fifth scenario that is more optimistic than the country's most favorable (base) scenario. The report, while commenting favorably on the budget preparation and review process, makes several recommendations for improvement: the recurrent cost implications of existing as well as proposed investments should be evaluated and justified; foreign assistance should be itemized by project; and financing for parastatals (even nongovernmental funding) should be indicated separately.

5.28 Several reports recommend increased cost recovery but do no mention the equity implications. Much attention is paid, however, to a more equitable intrasectoral distribution of resources through greater cost recovery (user fees), proposed in threequarters of all reports. The reconimendations for cost recovery at the primary level vary: some reports support it, while others suggest its elimination. In Haiti, parental 49
contributions are a major burden on household income, and costs rise throughout the primary cycle. The Kenya and Nigeria reports argue that high fees for primary users have lowered enrollment among the poor. But the Zambia report advocates the introduction of user fees. It argues that, given a spending constraint, modest charges are less damaging than are deteriorating services. However, if the user fees are not perceived as the lesser of two evils, parents may simply attribute to schooling an unduly high opportunity cost. Tanzania's public expenditure review reports that primary enrollments are falling because parents are questioning the value of education.

<!-- Start of picture text --> Figure V1: Implications of Proposed<br>Sector Reforins Analyzed in Reports<br>% of countries in each category<br>70 -<br>60 _.................... r.<br>4 0 - .. .............. , .............. ......ntr<br>40 . t 4 _ g %Categories<br>3 0 - . .. ..... . W : . ^g . ... ............ _ All<br>2 0 - W W ............ . m ................ E HiLo PE<br>ME Low PE<br>............. ....... M High SRIf<br>71- Low SRM<br>0<br>Social Impact Polit/lstit Feasib<br><!-- End of picture text --> 5.29 In general, the reports recommend increased user fees at higher levels of education as the most equitable method of cost recovery. However, several reports note that user fees for secondary and higher education are inequitable if the few low-income students who reach higher education are not given scholarships. Specific population groups -particularly the rural poor and girls--have inadequate access to education. But figures for these groups are rarely included in the reports. Only the Pakistan report specifically recommends targeting girls. Several reports discuss regional imbalances and ethnic or language disadvantages (among the Indian population in Guatemala and Peru, for example).

_50_
The Peru report notes that the general inadequacy of the infrastructure disadvantages the rural population because books and supplies are either unavailable or expensive.

_5.30_ Political and institutional factors. About two-thirds of the reports refer to the political or institutional feasibility of reforms. In the others, there is little discussion of the threats to sector policies, even when they are obvious. Eleven reports mention interest groups opposed to certain reforms--local politicians, ethnic groups, urban populations--but they usually do not discuss the implications of their opposition in detail. Several reports describe the political sensitivity of cost recovery and the possible backlash from even those groups able to pay, while others note opposition to targeted subsidies designed to benefit disadvantaged groups. Some reports describe institutional threats--the 'uigh administrative cost of cost-recovery measures, the lack of local and parental commitment to reforms, poor planning and execution capabilities, and very often a complete lack of materials and operational support.

5.31 The Peru report discusses the political opposition to reform, but it does not develop a feasible alternative. Both the Bank and the country's development plan advocate more government spending for education. The Bank recommends raising the real spending per student to the level of the 1970s, but with a greater than concomitant increase in output from organizational and efficiency gains. However, the Bank recommends more recurrent spending, partly at the expense of capital investments, and in so doing disagrees with the country's general philosophy on development and with its education sector priorities. The government's investment plan calls for a large school-building program, the implementation of which would divert resources from the recurrent budget. Since the government has explicitly rejected the Bank's development strategy as "failing to respond to the immediate exigencies of Peru's...socio-political situation," and since 'Without a very substantial improvement in the organization and management of the educational system, none of the...proposals can be successfully implemented," the prospects for implementation, let alone for sustainability, are minimal.

5.32 The Nigeria review recommends cost shifting and cost recovery measures with little reference to institutional feasibility. The report projects recurrent and capital expenditures forward from 1985 to 1990. To do so, it divides spending between federal and state levels, uses population and enrollment projections to determine the number of students at each level, estimates cost-recovery revenues, determines a composite cost structure, and calculates an annual growth increment. For universities, a 10 percent fall in spending per student is factored into the estimate for the initial year because these institutions are relatively well funded and "are most likely to be able to absorb a cut." Cost recovery estimates are calculated on the basis of projected enrollments, and it is assumed that fees are subject to 100 percent collection, although the report does not indicate whether this level of collection presently exists. The report has made good use of the information available, but it does not address the feasibility or sustainability of the suggested reforms. It does not discuss the political power or institutional and revenuecollecting sophistication of the states versus the federal government, nor does it analyze the w.llingness of the federal university system to absorb funding cuts. The Nigeria and Peru reports discussed here are from 1985 and 1987 respectively. A clear learning curve is 51
evident in recent reports. Nevertheless, coverage of sustainability issues is sporadic at best and deserves much more attention.

# E. Overall Assessment

5.33 The staff time and effort required to produce multivolume PERs are not justified by the results.41 PERs should be brief (no more than 100 pages) and useful information documents for negotiations between the Bank and the host country rather than all-inclusive reviewsY Given this caveat, the education specialist must consider carefully what to include. The purpose of the PER, to analyze the public sector budget, should be clearly reflected in the sector review, which should outline the budgetary and institutional issues that link the sector to the macroeconomy.

5.34 Since it is beyond the purview of a multisector review to go into detail about issues and processes, an important first step is to create a comprehensive and functional (rather than administrative) budget that will bring together all education financing and expenditures, regardless of source. Such budgets will not only facilitate CESW, but also make crosscountry comparisons more useful. The sector specialist will be better able to c7onclude that funding for education at a specific level is too high or too low according not only to personal expertise, but also to homogeneous comparative statistics.

5.35 The true level of funding for education is extremely difficult to determine. Categories such as "Ministry of Education expenditure" or "local government expenditure" can present a misleading picture of the total level of resources. The Bank should suggest to governments that they move toward developing a comprehensive, multisource education budget, and it should offer technical assistance for so doing.

5.36 The need for detailed and analytical budgetary knowledge is not specific to education. The imbalance between capital and recurrent spending is probably the most sector-specific concern in the budget. Any evaluation of capital and recurrent costs is hampered by the fact that portions of these costs are often hidden in noneducation line items in the budget. A standard list of items (see para. 6.07) should be included in any expenditure review of the education sector so that there will be 1) an accurate correlation with the total expenditure picture and 2) a basis for functional crosscountry comparisons and judgments.

5.37 The success or failure of public expenditure recommendations often rests upon the Bank's understanding of the mechanics and politics of the budget process. Cost recovery measures were proposed in three-quarters of the reports, but the optimal level of cost recovery cam,ot be determined if the true costs are overstated or understated. Cost recovery measures in such circumstances need to be analyzed in a general, rather than 4"PIRs and PERs from 1985 to 1987 required, on average, 19 staff/consultants and 101 staff weeks. De Melo (1988), Table 1, p. 3.

2/Ibid., p. 14.

52
partial equilibrium, framework. If not, they may be counterproductive in two ways. First, they may lead to declining enrollments as in Tanzania (see para. 5.28). Second, they may cause government revenues to decline as fewer students are enrolled to pay the fee. Additionally, there is little incentive for the Ministry of Education to alienate its constituents by carrying out cost recovery measures if, as is the case in many countries, the revenues are returned to the Treasury rather than to the Ministry. The budget and budget process need to be understood as institutional and political tools before feasible reforms are suggested.

5.38 Since PERs focus on public recurrent spending, most of which is wages, they need to emphasize the public sector wage structure. An adequate understanding of the salary structure in the wage-intensive education sector relative to other sectors is a crucial first step in determining whether specific policy proposals will have sector-neutral effects. Such a review is essential in any PER that makes specific recommendations for the treatment of public sector wages.

5.39 It is also important to specify who controls revenues and expenditures and how intersectoral and intrasectoral conflicts are to be resolved. The Ministry of Education probably has no administrative or political control over education resources assigned to outside agencies, or even over the reallocation of specific line items in its own budget. The feasibility and sustainability of intrasectoral resource reallocations (a reform recommended in three-quarters of the reports) depends greatly upon an understanding of institutional processes. Coordinated sector development is all but impossible when administrative responsibility is fragnented among several (often competing) ministries. Effective and sustainable reallocation of education sector resources may only be possible after policies that address budget processes and their inflexibility are in place.

53
# **VL CONCLUSIONS AND RECOMMENDATIONS**

6.01 The goal of a public expenditure review is to add to the Bank's<sup>understanding</sup> of how macro and sector priorities are determined and balanced<sup>over a given period of time</sup> and in accordance with explicit or implicit priorities.<sup>They are a useful vehicle for</sup> highlighting sector cost and financing issues and for analyzing<sup>them in the context of the</sup> entire economy. PERs have become a useful tool in the public<sup>expenditure reform process,</sup> but there is still a tendency to use them to fill in the<sup>gaps in sector knowledge. This</sup> process is an inefficient way to gather information and<sup>a less than optimal use of sector</sup> expertise.

6.02 Approaches and methodologies vary greatly, as does sector coverage,<sup>even by</sup> similar countries. The sector specialist will always need<sup>to rely on personal experience</sup> and intuitive judgment to some extent, but there is at present<sup>too much room for subjective</sup> interpretations, conclusions, and recommendations.<sup>These compromise the credibility of</sup> policy recommendations.

6.03 Too often the only connection between macroeconomic analysis<sup>and sector</sup> analysis is the budget constraint. The best PERs<sup>from the education sector perspective</sup> develop other macro/sector relationships. CESW and<sup>reviews of the budget and budget</sup> process precede the public expenditure review, which<sup>includes education and the social</sup> sectors in accordance with an explicit ranking of priorities.<sup>Throughout the review, the</sup> effects of changes in financing or policy at one<sup>level are taken into account when evaluating</sup> reforms at another level.

6.04 Because the budget and budget process are often deliberately<sup>opaque, the</sup> evaluation of institutional and political priorities and<sup>constraints needs to be strengthened</sup> in order to ensure the sustainability of policy reforms.<sup>Greater realism in the assessment</sup> of the political and social feasibility of proposed sector strategies<sup>is necessary. Also needed</sup> is better assessment of the institutional and managerial<sup>abilities of the agencies that will</sup> be called upon to administer reforms. The<sup>political and managerial caveats apply</sup> particularly to the intrasectoral reallocation of resources<sup>and responsibilities.</sup> 6.05 The chapter or section in a PER on education should<sup>provide an accurate</sup> picture of how funds to the sector are allocated and<sup>disbursed. Providing this picture</sup> entails an evaluation of the expenditure data and the<sup>expenditure process. In particular:</sup> a) If the budget process and the relationship of the<sup>budget to actual spending</sup> are not transparent, then a budget process review may be<sup>a prerequisite for an</sup> expenditure review.

b) The PER cannot be substituted for CESW. If the<sup>necessary data are not</sup> available, ex ante sector work is a prerequisite<sup>for any PER that attempts to</sup> make and evaluate macro and sector links.

54
c) For in-depth analysis of sector cost and financing issues, single-sector PERs, or possibly social sector PERs, are more appropriate than multisector reviews.

6.06 Extensive detail is not a substitute for a well-focused analytic discussion of the major issues, priorities, and policies of the sector and their relationship--economic, political, and institutional-to the country's development program. Foremost, there should be a clear rationale for the inclusion of education in the report and an explanation of the relationship of the sector to the overall theme or agenda of the PER.

6.07 The education sector (like other social sectors) has specific characteristics that affect the relationship between sector and macro expenditures and that can skew the impact of "sector-neutral" policies. PERs should pay explicit attention to these concerns, which include: a) The different time frames for the attainment of macroeconomic and education sector goals. Reports should be explicit if and when these differences result in short-term conflicts about optimal resource allocation.

b) The often substantial part of education sector spending (governmental and nongovernmental) that is outside the purview and control of the Ministry of Education. A multisource budget should be developed that includes allocations to the sector from all government and nongovernment sources. Simple spreadsheet programs could be developed to help the reorganization and tracking of government budget items by economic and sectoral functions.

c) The overlap and lack of comprehensiveness of the capital and recurrent budgets. Capital spending on education that is outside the purview of the Ministry of Education should be included in the education expenditure framework. Recurrent costs are often hidden in the investment budget. While this procedure may be necessary in p1actice, analytically the two types of spending should be separated. An all-inclusive picture of the capital and recurrent budgets and the relationship between them should be developed.

d) The low ratio of capital to recurrent spending in the sector and the common imbalance between them. The conmmon economic retrenchment policy of cutting recurrent costs in the short term can have a disastrous effect on the education and social sectors if they are not protected. Across-the-board cuts affect these sectors more severely than others, and such policies tend to exacerbate imbalances between (functional rather than budgetary) investment and recurrent allocations to the sector.

e) The low ratio of nonwage to wage expenditures within the sector's recurrent budget. Any policy that proposes economy-wide adjustments in public sector wages will likely affect the education sector more severely than less wageintensive sectors. When these policies are being considered, particular attention must be paid ex ante to the wage structure and to the balance between teaching _55_
and nonteaching wage costs. In particular, the ratio of<sup>nonsalary spending to</sup> total recurrent spending by level of education is a useful crosscountry<sup>indicator.</sup> f) The large and capital-intensive foreign financing component<sup>in many low-</sup> income countries, which is often fragmented among many<sup>donors and projects.</sup> The long-run goal in many countries might be to bring the Bank's<sup>influence to</sup> bear on donor financing--to create a system for prioritizing<sup>and tracking needs</sup> and for balancing investment and recurrent support. In the<sup>short, run, collating</sup> information on donor financing and its management<sup>would be a useful step.</sup> 6.08 The treatment of the education sector in PERs must be<sup>analyzed in the broader</sup> context of Bank operations, in particular in the context of<sup>adjustment programs, which form</sup> the background for the PERs in two-thirds of the countries<sup>reviewed. This report is the</sup> first step in a broader research agenda which includes: a) An analysis of the effects of adjustment-related operations<sup>on the education</sup> sector.

b) A discussion of the treatment of the education sector in PERs<sup>in the context</sup> of the economic austerity and fiscal retrenchment<sup>that often form the</sup> background for policy reform.

c) The development of guidelines for an improved analysis<sup>of education sector</sup> cost and financing concerns in the macroeconomic expenditure context.

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## **ANNEX I: QUESIIONNAIRE FOR EDUCATMON SECrOR TREATMENT IN PUBUC EXPENDrTURE REVIEWS**

## **L ITRODUCTION**

Country: Review Name: Number: Date:

# IL THE **EDUCATION** SECIOR IN THE MACROECONOMIC **CONTEXT**

# A. Justification and operational context of review

1. What is the focus of the report? To analyze the impact of education sector concerns on the overall public budget?

To analyze primarily the overall public budget with: education funding as a targeted area for budgetary concerns_ education as a minor area of concern_ not clear/not stated_ 2. Is the review multisectoral or on the education sector only? If multisectoral, what sectors are reviewed in separate chapters or sections?

# How is education treated?

an integral sectora minor sector_ barely mentioned_ not treated at all

# B. Assessment of country situation

1. Country situation at time of review Country income level: **LU** LMI UMI UI Classified as oil exporter? Yes/No Classified as "highly indebted"? Yes/No

2. Total government expenditure as a percentage of GDP? (For comparative purposes, data can be taken from World Development Report.)

- Year? _ Rising trend?_ _ Falling trend?

3. What is the overall macroeconomic situation of the country? Improving Stable_ Deteriorating-_ What is the time period for the analyis? Short term Long term 57
# 4. Description of country economic situation:

_5._ What is the overall development strategy of the country? Major policy objectives?

<!-- Start of picture text --> Major policy instruments?<br><!-- End of picture text --> 6. What is the stated time frame of the sector review and policy proposals? ___medium term (3-5 yrs.) and/or _l.ong term (--> year 2000)

# C. Treatment of macro-sector interfaces

1. Government spending on education as a percentage of all government spending? *Year?__ Rising trend?_ _ Falling trend?_ _

2. Government spending on education as a share of GDP??_ Year?_ _ Rising trend?_ _ Falling trend?

3. Does the report discuss the effect on education of noneducation policies (for example, guaranteed employment for graduates, wage and civil service rigidities, immigration, emigration)?

4. What external forces (demographics/labor market needs) drive education policy?

_5._ Does the report mention specific dangers to the sustainability of education sector priorities? Yes/No Which?

# D. Sector issues

1. Are there inefficiencies in the provision of education according to internal efficiency criteria? -dropout rates by problem level

- --repeater rates by problem level

- _unit cost per pupil by problem level

___enrollment rates by problem level 58
2. Are there inefficiencies in the provision of education according<sup>to external</sup> efficiency criteria (for example, employment or unemployment data by educational level)?

3. Summary of sector issues at time of report:

# E. Sector objectives and priorities

1. What are the sector objectives? Please specify educational<sup>levels.</sup> _expansion/restructuring education systems

-quality improvements

- .. equity/access improvements

.mproved internal efficiency

-improved external efficiency

2. Major policy instruments, if any?

3. Do the macro-priorities agree with the sector priorities? Yes/No Objectives in accord? Yes/No If not, how and why is there disagreement?

- Instruments in accord? Yes/No If not, how and why is there disagreement?

## **IIL** SECITOR **COSTS AND** FINANCING

1. Is government spending on education as a share of all government spending too high?_ too low?_ Or is the level of spending not a problem by itself?_

- As determined by what information:

- _falling trend of education spending/GDP or education spending/government spending?

- -rising trend of educatian spending/GDP or education spending/government spending?

# __regional or other intercountry comparisons?

59
# 2. Are there other budgets (that is, other government ministries) in addition to the educational budget that are mentioned as important sources of education financing? Yes/No Which?

# Are these included in the quantitative analysis? Yes/No

3. Are regional or local governments mentioned as significant sources of education financing? Yes/No Role evaluated quantitatively? Yes/No 4. Is the private sector mentioned as a significant provider of education? Yes/No Role evaluated quantitatively? Yes/No _5._ Is the private sector mentioned as a significant source of education financing? Yes/No Role evaluated quantitatively? Yes/No 6. Is there intrasectoral misallocation of resources? Yes/No As determined by what information:

- -Percentage of all central government education spending for primary education? too high? too low?based upon what criteria?

- Percentage of all central govermment education spending for secondary education? too high?too low?based upon what criteria?

- -Percentage of all central government education spending for vocational education? too high?_ too low? based upon what criteria?

- Percentage of all central government education spending for higher education? too high?_ tGo low? based upon what criteria?

7. Are there inefficiencies in the provision of education according to government budgetary criteria?

- -capital vs. recurrent costs_

- _insufficient funds for maintenance_

- -- insufficient funds for materials/supplies

- -within recurrent costs, wage vs. nonwage costs_

- _teaching vs. nonteaching wage costs_

- ratio of teachers' salaries to per capita GNP_t or to average civil service income_

8. Speciffic budge. - misallocations by educational level: (according tc a. or other criteria) 60
# **IV. SECIYR FINANCING STRATEGIES**

**1.** Adjustment to public expenditure priorities Maintain level of funding to education sector?_ Increase public spending on education?9 Reduce public spending on education?_ Unclear/Not stated

2. How is this adjustment to be effected' Redistribute budget allocations among sectors? How?

# Reduce educational unit costs? How?

Increase recourse to other sources of financing? _foreign aid? ljocal/regional government? .NGOs/religious organizations? -user fees/cost recovery? _other private sector contribution to education financing?

3. Are the financing conclusions realistic in light of the overall macroeconomic situation? Yes/No If not, how and why not?

4. Do the financing conclusions agree with the educational sector objectives? Yes/No If not, how and why not?

# **V. METhODOLOGY**

- A. Sector coverage

1. Did an education sector specialist participate in the mission/report preparation? Yes/No

2. What is known about prior public expenditures? There have been several/many years of Bank experience and reliable data___ There are underlying courtry/expenditure/sector studies that are: included in the review____ referred to in the review implied but not mentioned_ The Bank has little experience in the countryNot clear/not stated61
3. Review of education sector

- a. Analysis covers recurrent budget?. capital budget? both?_ Only central government spending on education?_ Only Ministry of Education spending?-

Central and local government spending on education? Non-central government spending on education? private schools?_ private contributions? External spending on education?

- b. Reviews all levels of education_ Only covers education generally. Focuses on Primary.

- Secondary-

Higher_ Other_ Is any attention paid to vocational education and training? Yes/No At which levels?

# 4. Data

- a. Are the data government-generated? Yes/No From government planning documents?_ From actual expenditure/investment documents?

- Bank-generated? Yes/No

- b. Are the data accurate and reliable? Yes/No Not clear/not stated_

- c. Does the report state which data are missing? Yes/No Which?

- d. Does the report state which data are presumed inaccurate/unreliable? For example, ghost workers, inconsistencies between ministry statistics. Yes/No Which?

# B. Sector analysis

1. Are comparisons made with other countries? Yes/No How are the comparator countries selected (neighboring, similar per capita GNP, similar economic structure)?

For which data?

2. Financing Model:

- a. Was an education sector financing model usea? Yes/No For which level(s) of education?

62
- b. What is the objective of the model? Minimize expenditure for a given set of educational objectives?

- Maxrimize objective for a given resource availability (budget constraint)?

To quantify a financing gap?_

- c. How are trade-offs among multiple objectives determined? Cost-effectiveness_

- Clear government policy prioritiesIntuitive/subjective assessment by Bank_-_ Not clear/not stated_

- d. Were alternative scenarios generated? Yes/No

Specify:

- e. Are efficiency improvements assumed in the model simulations? Yes/No For which educational level(s) Specify:

# C. Institutional issues

1. Is the sector strategy: Government-generated?

- Bank-generated? Genesis unclear/not stated?_

2. Is there any discussion of the political/institutional feasibility of proposed changes? Yes/No 3. Are the equity implications of macroeconomic and sector policies clearly stated and explored? Yes/No 4. Is the social impact of the proposed policy changes analyzed? Yes/No Specify: _5._ Additional remarks: 63
## **ANNEX** Ii: **UST** OF **REPORTS REVIEWED**

# Africa

|**Botswana**|6031-BT: Public Expenditure and Development in Botswana (June 3,<br>1986)|
|---|---|
|**Burldna Faso**|Cogts, Financement et Politique de l'Education au Burkina Faso (May<br>7, 1987)|
|**Camer.oon**|7451-CM: Adapting Public Finances to a Changing Macroeconomic<br>Environment (October 6, 1988)|
|**Central Afrin**|Public Expenditure Review (October 23, 1989)|
|**Cote**dvoire|6051-IVC: The C6te d'Ivoire in Transition: From Structural<br>Adjustment to Self-Sustained Growth (March 9, 1987)|
|**Ghana**|5824-GH: Priorities for Public Expenditures, 1986-1988 (August 13,<br>1985)|
||Possibilites Budgetaires et Besoins Financiers du Secteur de l'Education<br>en R6publique du Guinee, J. Orivel et J. Perrot (November 1988)|
|Kenga|7508-KE: Public Expenditure Issues (April 14, 1989)|
|Lnsoth|7243-LSO: Public Expenditure Priorities in Lesotho (September 28,<br>1988)|
|**Madagascar**|7803-MAG: Public Expenditure, Adjustment and Growth (December<br>20, 1989)|
|**Malawi**|7281-MAI: Public Expenditure Review (February 10, 1989)|
|Mali|Coaits, Financement et Efficacite des Enseignements Superieur et<br>Secondaire au Mali (November 1988)|
|**Moafmbique**|7615-MOZ: Public Expenditure Review (September 5, 1989)|
|Nier|Cofts, Financement et Politique de l'Education au Niger (July 13,<br>1988)|
|Nigeia|Education Sector Expenditure Review (July 1985)|

64
**Rwanda** 7717-RW: Public Expenditure Program: An Instrument of Economic Strategy (October 19, 1989)

- __1w_ 6450-SE: A Review of the Three-Year Public Investment Program, 1987/88-1989/90 (February 26, 1987)

- Sierra ILone 5513-SL: Review of the Public Expenditure Program (September 13, 1985)

- **TIzania** 7559-TA: Public Expenditure Review (May 22, 1989)

- Zambia 6438-ZA: Public Expenditure Review (October 6, 1987)

- Zimbabwec Public Expenditure Review (February 1986)

- Bang adeh 7545-BD: Public Expenditure Review: A Framework for Public Resource Management in the Fourth Five Year Plan Period, FY91-95 (March 13, 1989)

- **Ehilizwines** 7473-PH: Education Sector Study (December 1988)

# Europe. Middle East and North Africa

- J.QFtdanl 5697-JO: Efficiency and Equity of Govermment Revenues and Social Expenditures (June 1986)

- 4156-MOR: Priorities for Public Sector Investment 1981-1985 (June 15, 1983)

- 5962-PAK: Economic and Social Development Prospects (February 18, 1986)

- **Tunisia** 5622-TUN: Financing of Education: Past Trends and Future Developments (April 22, 1985)

- lbrkey 6249-TU: Education and Training Sector Survey (September 1986)

# Latin America. Caribbean

- Biovia 7746-BO: Public Sector Expenditure Review with a Special Emphasis on the Social Sectors (September 15, 1989)

65
Qalambia 7891-CO: Public Sector Expenditure Review (August 1, 1989) CD=bi 7877-CR: Public Sector Expenditure Review (September 21. 1989) Gatemal 7478-GU: Public Sector Expenditure Review (May 23, 1989) Hi 6113-HA: Public Expenditure Review (September 29, 1986) Handucaa 7861-HO: Public Sector Expenditure Review (December 6, 1989) 6371-ME: Public Sector Investment Review-A Joint Report (August 5, 1986) E1 6528-PE: Public Expenditure Review (January 29, 1987) 66
# ANNEX m: **COUNTRY** TYPOLOGY

This annex documents the country typology adopted for the comparative analysis of PER policy conclusions related to education cost and financing issues. The typology essentially classifies countries according to the basic policy-related determinants of the supply of public resources to the education sector. At this stage, it is limited to the sample countries covered in the present PER study. It is also static, as it relies on country data for one single benchri;ark year. Ultimately, its usefulness should benefit from a more comprehensive coverage, as well as from the incorporation of patterns of recent changes in key variables.

## I. The Methodological Framework

From a resource availability perspective, the absolute level of govermnent spending on education (SR) can be seen as the product of three basic factors: the _level of GNP_ (Y), that is, the total supply of national resources; the efficiency of _public resource mobilization_ (PRM), as reflected by the ratio of government revenue to GNP; and _sector resource allocation (SRA),_ that is, the part of government expenditure absorbed in the education sector. In formula:

## SR = Y * PRM*SRA.

For crosscountry comparison, the relative level of sector resources (SRM) is being defined in terms of GNP, and therefore:

## SRM = PRM * SRA.

Sector resource availability thus depends on two policy-related parameters: resource mobilization and resource allocation. In the PER context, the former concerns the country team's macroeconcmist, or public finance expert, while the latter is the major focus of interaction between the macroeconomist and the sector specialist. It thus seems relevant, in the context of this review. to classify countries according to their respective PRM and SRA levels.

However, whether the supply of public resources for education is high or low by international standards bears little relation to the sector's actual financing needs. Government spending on education may represent a substantial proportion of GNP, perhaps at the limit of sustainable resource mobilization and sector allocation, and still not meet the sector's overall financing requirement. Short of a comprehensive accounting framework of sector financing needs, an international comparison of public spending on education therefore still ought to incorporate some comparative notion of sectoral output performance. To this end, countries have been further distinguished according to their primary enrollment rate (PE), which was selected in view of the high priority of achieving universal primary education among sector objectives, as well as the large amount of education financing absorbed by this subsector (around 40 percent on average in developing countries). However, since PE. in addition to sector resource mobilization parameters, also 67
reflects countries' overall level of development, it would seem justified to eliminate the influence of this structural long-term relationship in order to obtain a universally applicable comparative output criterion. This was done by correcting PE for the "estimated" contribution of per capita GNP (see table 1).

# I. The Country Typology

The PER reports selected for review cover a sample of 36 countries, 19 of which are in the low-income range. This sample was subdivided with respect to each of the three typology parameters into "high" and "low" country groupings, depending on whether the parameter value for each country lies above or below the median value of the sample. "High" and "low" are thus relative terms that do not indicate value judgments. All country data are from the Bank's 1989 World Development Report, complemented from other sources where needed. Parameter values in the sample are shown in table 1.

The first step in the development of the typology is to combine the PRM and SRA criteria into a sector financing matrix, which characterizes each country according to its "high" or "low" status with respect to the policy determinants of overall sector resource availability. This matrix, shown in table 2, provides a rough comparative framework of basic priorities with regard to sector financing issues. The actual position of countries on the PRM and SRA scales is illustrated in figure 1.

Table 3 completes the country typology. It shows the net outcome of the interaction of PRM and SRA, that is, the overall level of sector resource mobilization relative to GNP (SRM), referenced against the selected educational output criterion (PE). The actual position of countries on the SRM and PE scales is illustrated in figure 2. In addition, table 2 indicates for each country the critical parameter(s)--PRM, SRA, or both -determining the high or low status of SRM.

Of the 36 countries Li the review, 20 have a comparatively low level of sector resource mobilization, including 12 of the 19 low-income countries.1Y On the educational output-side, however, 19 countries have a comparatively high primary enrollment rate, including 9 low-income countries.

Surprisingly, the largest category emerging from the typology in table 3 consists of 13 countries with low sector resource mobilization (SRM) and high sector output (PE). This may be interpreted in several ways, depending on country-specific circumstances: a relatively high proportion of SRM is allocated to primary education; central government spending on education in general, or on primary education in particular, represents only a small proportion of total spending because local government or private contributions are high; SRM has been declining in recent years, but this has so far affected quality rather than PE.

l/The median SRM (2.67) represents the product of the median PRM and median SRA, rather than the median of the product of the two medians.

68
<!-- Start of picture text --> Figule I<br>Sector Resource Allocation (SRAJ<br>30_<br>Rwaida .<br>25 Hall. | CAR<br>Glaian s~~Keiiya<br>H ig h gigel.s.PeiU Se egal.<br>20 ColoBbil. .Buki a Faso * Zimbabve<br>Philippiies. Handucas.<br>16.1 Giatenala. * Costa Bica *llococco<br>15 fladagasca Lesotko Jod Tulnsia<br>Sieuta Leoie. Ti * . *Caneloou<br>Bolivia.<br>10 Bangladesh, n alavi.<br>Itoco. Guinea . * Zakbia<br>Low liai ie<br>Balttie . igelIa<br>S .n ozaa bique<br>Patistan<br>0 I I<br>0 5 Low 10 15 20 25 High 30 35<br>Public Resource IMobilization (PRMI<br>lexcludiig Botswaia aid Cole dlivoiile<br><!-- End of picture text -->
<!-- Start of picture text --> Figure 2<br>Primary Enrollment Rate (PE) a/<br>-<br>14 0 iadagascar<br>Leso ho. z imbave<br>High<br>12 0 - Zambia.<br>Higeria Philippines. Kenya,<br>100 o:ambiqaen e s Toiley* Came oon Hondaias. *Taxlisia<br>*Haili Taizania Penu"' mc 1lombia<br>80 2 8 liwia . I5alavi<br>20 - angaladesbo. Rwanda CARl IIIOCCO<br>0 fl~~~~~~~~1ex iE D Guatemaala. G banas C otaRcSenegial<br>60 - Sierra Leone Joda..Sene a<br>Low PakistanD *Bilina Faso<br>4U - Guiuea. * kali*<br>20-<br>0<br>0 t LoW 2 2.793 4 Higb 5 6<br>Sectoi Resouice Mobilization (SRII) bl<br>(exclidiig Botswana and Cote dlvolirel<br>a/ PE Pe - .36 1 (GNP - .631<br>hi SRII SRA I PRIn<br><!-- End of picture text -->
**Table 1: Parameter Values by Conmt (in percent)**

||Public<br>|Sector<br>|Sector<br>|Primary<br>|
|---|---|---|---|---|
|COUNTRY|Resource<br>Mobilization<br>(PRM)|Resource<br>Allocation<br>(SRA)|Resource<br>Mobilizatio<br>(SRM)|Enrollment<br>n Rate<br>(PE*)|
|Bangladesh|9.5|10.6|1.01|76.85|
|<br>Bolivia|3.2|11.6|0.37|88.79|
|Botswana|75.2|18.4|13.84|89.94|
|Burkina Faso|15.3|19.0|2.91|50.77|
|Cameroon|19.4|12.7|2.46|94.81|
|Central African Rep.|17.9|24.0|4.30|76.76|
|Colombia|13.8|19.0|2.62|92.13|
|Costa Rica|23.7|16.2|3.84|66.87|
|C6te d'Ivoire|28.2|35.9|10.12|74.06|
|Ghana|14.5|23.9|3.47|71.60|
|Guatemala|12.7|16.6|2.11|64.53|
|Guinea|23.1|7.9|1.82|40.11|
|Haiti|10.4|6.0|0.62|87.68|
|Honduras|25.9|18.1|4.69|95.55|
|Jordan|30.7|13.8|4.24|57.66|
|Kenya|20.8|23.1|4.80|104 7I|
|<br>Lesotho|22.0|15.5|3.41|124|
|Madagascar|_15.1_|16.0|2.42|136.|
|<br>Malawi|22.6|10.8|2.44|80.85|
|Mali|15.1|25.0|3.78|37.06|
|Mexico|13.3|8.7|1.16|70.98|
|Morocco|25.6|16.9|4.33|79.72|
|Mozambique|20.0|4.0|0.80|98.49|
|Niger|11.3|21.0|2.37|42.26|
|<br>Nigeria|18.5|5.9|1.09|101.32|
|<br>Pakistan|16.7|2.6|0.43|54.04|
|Peru|11.9|21.0|2.50|91.89|
|Philippines|12.9|18.0|2.32|107.43|
|<br>Rwanda|12.7|28.0|3.56|78.83|
|Senegal|19.7|21.8|4.29|58.94|
|<br>Sierra Leone|6.5|12.8|0.83|56.83|
|Tanzania|16.3|8.3|1.35|85.13|
|Tunisia|34.4|14.3|4.92|98.28|
|Turkey|18.5|12.6|2.33|96.21|
|<br>Zambia|24.4|8.3|2.03|117.62|
|Zimbabwe|28.9|20.3|5.87|130.79|
|Medianh/|17.3|16.1|2.79|80.29|

71
"/Cross-sectional regression of PE on per capita GNP (in $000) yields the following result: PE = 0.36 GNP + 0.59 R<sup>2</sup> = 0.32 (0.09) This estimate was used to normalize each country's PE to the sample's median per capita GNP level ($630); hence: PE = PE - 0.36 ' (GNP - 0.63) k/Excluding Botswana (extremely high PRM) and Nigeria (very low SRA, reflecting only federal budget).

Sourc: World Development Report 1989.

Table 2: Educatiofl Sector Resourc Availabilit I-HGH SRA LOW SRA **HIjGHi** Botswana Cameroon MRM CAR Guinea C6te d'Ivoire Jordan Costa Rica Lesotho Honduras Malawi Kenya Moazambique Morocco Nigeria Senegal Tunisia Zimbabwe Turkey Zambia **_LIW_** Burkina **Faso Bangladesh** ERM Colombia Bolivia Ghana Haiti Guatemala Madar Mali Mexico Niger Palistan Peru Sierra **Ieone** Philippines Tanzania Rwanda

# Note: Low-income countries are in bold.

'/Federal spending on eiucation is only about one-third of total sector spending. Nigeria would be a high SRA country if state expenditures were taken into account.

72
Table 3: Sector Resource Mobilization and Educational **Outut** <!-- Start of picture text --> IGH SRM LOW SRM<br>Critical ~~~~~Critical<br>Prmeterd/ ParmeeP<br>IUQHTunisia PRM Philippines PRM<br>D.~ Lesotho PRM Colombia PRM<br>Botswana PRM/SRA Peru PRM<br>Kenya PRM/SRA Turkey SRA<br>Zimbabwe PRM/SRA Cameroon SRA<br>Honduras PRM/SRA Malawi SRA<br>Mozambique SRA Nigeria SRA<br>Zambia SRA<br>Madagasr PRM/SRA<br>Tanzania PRM/S.RA<br>Bolivia PRM/SRA<br>Haiti PRM/SRA<br>WDW Jordan PRM Niger PRM<br>PE Burkina Faso SRA Guatemala PRM<br>Ghana SRA Guinea SRA<br>Mali SRA Palcistan PRM/SRA<br>Rwanda SRA Sierra L PRM/SRA<br>Morocco PRM/SRA Bangladesh PRM/SRA<br>CAR PRM/SRA Mexico PRM/SRA<br>COte d'lv. PRM/SRA<br>Senegal PRM/SRA<br>Costa Rica PRM/SRA<br><!-- End of picture text --> Note: Low-income countries are in bold. i/Policy parameter(s)--PRM, SRA, or both-responsible for SRM being high or low.

The next largest group consists of 10 countries that combine a high SRM with a low PE. In this group, the high spending on education (whether because of high SRA, high PRM, or both) is not matched by a high sector output. A major issue for further analysis is therefore one of efficiency in the use and intrasectoral allocation of sector resources. The high SRM status of the low-income countries in this group is largely due to a comparatively high SRA, which more than offsets a low PRM. This raises the issue of the sustainability of the government's strong commitment to education in the face of low 73
initial levels of educational output, low absolute levels of mobilizable resources, and the low efficiency of, or potential for, public resource mobilization.

The two remaining groups of countries are straightforward, in the sense that high or low levels of sector resource mobilization correspond to high or low levels of educational output. In the former case, sector savings might be pessible. In the latter case, it would seem imperative that SRA increase where it appears a critical factor in the low comparative level of sector resource availability; this tpplies to four of the five low-income countries in the group.

A closer look at table 3 suggests that SRA r..ther than PR{M determines the position of low-income countries on the SRM scale. PKM appears to play a more dominant role in the deter-i-ination of sector resource availability in middle-income countries. This phenomenon has an evidenit procedural implication in the PER context, namely: adequate public resource allocation to education ought to be given stronger emphasis in poorer ccuntries, where the overall resource base is weaker, than in richer countries.

# III. Interpretation of the Country Typologv

This section reviews the policy diagnosis and strategic implications of the sector financing situations arising from the interplay of public resource mobilization and sector resource allocation. The same series of sector financing situations is reviewed twice: once in conjunction with a high level of educational output (subsection A), and again in conjunction with a low level of educational output (subsection B).

# A. HIGH PE

A1. LOW PRM/LOW SRA: Inadequate supply of public resources to the sector, reflecting low public resource mobilization and a weak commitment by the govermnent to education. **There** may thus be a<sup>-</sup> equity issue at the primary level, since high PE, under public resource constraint, probably means substantial parental and community contributions, or a twotier system (low qualty/low cost for the poor, and vice-versa). SRA needs to be increased, for support of equity objectives and quality improvements at the primary level, in particular where PE includes high repetition rates. Additional public financing should also benefit postprimary levels, depending on the specific cost-effectiveness situation. Countries: Bolivia, Haiti, Madagascar, Tanzania.

# A.2. JLOW PRMlIHIQH SRA:

- (a) LOW SRM: Inadequate supply of public resources to the sector, in spite of strong commitment to education by the government. The sustainability of SRA is at issue, depending on the prospects for gradually raising PRM. Mobilization of nongovernment resources may be required for quality improvements and possibly for improving access to postprimary levels. Countries: Colombia, Peru, Philippines.

74
- (b) HI-GH SRM: Strong commitment by the government to education guarantees in principle ap adequate supply of public resources to the sector, in spite of low public resource mobilization. Sector efficiency gains might be used to provide temporary relief to the PRM constraint, particularly in highly indebted countries. Countries: none in the sample.

# A.3. HI-GH k iAM/LOW SRA:

- (a) LOW SRM: Inadequate supply of public resources to the sector, reflecting weak commitment to education. The high PRM level would justify raising SRA, particularly in low-income countries. Postprimary levels likely command F sme priority in the allocation of incremental sector resources. Quality and equity may also be at issue at the primary level. Countries: Cameroon, Malawi, Mozambique, Nigeria (see, however, note a in table 2), Zambia, Turkey.

- (b) HIGH SRM: In principle, adequate supply of public resources to the sector, thanks to high public resource mobilization. However, unfulfilled sector objectives and outstanding quality and equity issues might require a higher level of government commitment to education, particularly where PRM prospects are uncertain. Countries: Lesotho, Tunisia.

A.4. HIGH PRM/HIGH SRA: Adequate supply of public resources to the sector. There is in principle financial room for addressing sector-wide quality issues and equity concerns. Countries: Botswana, Honduras, Keilya, Zimbabwe.

- B. LOW PE

B.1. LOW PRMILOW SRA: Overall sector underfinancing from public and private sources. An increase in SRA is required; this may not be enough, however, to ensure an adequate supply of sector resources, given the low level of public resource mobilization. SRA may be particularly difficult to increase in highly indebted countries. The combination of sector underfinancing and the low piimary enrollment rate generally suggests that efficiency at all levels should be increased and more equitable intrasectoral allocation of public resourcec should be promoted. Temporary external support to the recurrent budget may be required in low-income countries. Cour.tries: Bangladesh, Mexico, Pakistan, Sierra Leone.

## B.2. LOW PRM/HIGH SRA:

- (a) LOV SRM: Overall sector underfinancing in spite of government's strong commnitn*ent to education. As in A.2 (a), sustainability of

75
SRA is at iasue. Low PE points toward the need to focus on efficiency in the use and allocation of sector resources at all levels. Direct efficiency gains and cost recovery measures at higher levels could free resources for quality improvements and expansion at the primary level. Temporary external support to recurrent budget may be required in low-income countries. Countries: Guatemala, Nigcr.

- (b) HIGH SRM: Strong but ineffective government commitmeL. to education. The situation appears characteristic of low-income countries: in view of the limited resource base (from an absolute income level and mobilization efficiency perspective), as well as the low initial educational output situation, even a relatively high apparent sector resource mobilization remains insufficien **t** o meet actual sector needs. The sustainability of the government's commitment is therefore an issue. For the rest, sector strategic priorities are similar to B.2 (a). Countries: Burkina Faso, Ghana, Mali, Rwanda.

- B3. HIGH PRM LOW SRA:

- (a) LOW SRM: Given low PE, high PRM makes this a case for increasing SRA. Incremental public financing is to be used for primary education, in part to relieve the financial burden on parents and communities. Temporary external support to recurrent budget may be required. Countries: Guinea.

- (b) HIGH SRM: High public resource mobilization generates in principle an autquate supply of resources despite the government's weak commitmen **t** o education. The low PE, however, points toward major inefficiencies in the use and allocation of sector resources. Comprehensive sector reforms are thus required, possibly combined with some increase in SRA. Countries: Jordan.

B.4 HIGH PRM/IIGH SRA: Strong but ineffective commitment by the government to education, under relatively adequate public resource mobilization conditions. This is the archetypal case for sector adjustment to improve efficiency in the use and allocation of budgetary resources, primarily in favor of primary education. For the highly indebted countries, the high SRA may not be sustainable. A sector adirstment loan may be an appropriate vehicle for required sector reforms, providing temporary budget relief until efficiency gains are realized. Countries: Central African Republic, Costa Rica, Cote d'Ivoire, Morocco, Senegal.

76
# ANNEX IV: COMPARATIVE ANALYSIS OF SECTOR FINANCING STRATEGIES: SUMMARY OF OUTCOMES (Percentage of countries in each category)

||Low SRMI|Low SRMI|High SRMI|High SRM/|Low|High|Low|High|<br>Low|Middle||
|---|---|---|---|---|---|---|---|---|---|---|---|
||Low PE<br>(7)|High PE<br>(13)|Low PE<br>(10)|High PE<br>(6)|SRM<br>(20)|SRM<br>(16)|PE<br>(17)|PE<br>(19)|Income<br>(19)|Income<br>(17)|Total<br>(36)|
|Improving|71|31|10|0|45|6|35|21|37|18|28|
|Stable|14|31|30|67|25|44|24|42|21|47|33|
|Dotiwrating|0|31|50|33|20|44|29|32|26|35|31|
|Low|71|62|20|17|65|19|41|47|53|35|44|
|Hgh|0|8|40|50|5|44|24|21|16|29|22|
|Intraset<br>aliocaflon||||||||||||
|LOW pimay|71|23|70|33|40|56|71|26|53|41|47|
|**-I**<br>I.owpostpimary|29|15|20|0|20|13|24|11|11|24|17|
|High posrmary|71|62|90|67|65|81|82|63|74|71|72|
|Budget|57|92|90|67|80|81|76|84|89|71|81|
|Intemal|71|100|90|67|90|81|82|89|89|82|86|
|Exernal|29|77|60|67|60|63|47|74|63|59|61|
|_Sectorobpecws_||||||||||||
|Access||||||||||||
|Primay|86|62|80|67|70|75|82|63|84|59|72|
|Postprimar|43|46|30|50|45|38|35|47|42|41|42|
|Qualitykmpvement||||||||||||
|Primary|71|92|90|67|85|81|82|84|95|71|83|
|Postpinary|43|54|40|50|50|44|41|53|42|53|47|
|Equity||||||||||||
|Primy|57|54|50|50|55|50|53|53|42|65|53|
|Possprmay|14|23|10|0|20|6|12|16|16|12|14|
4

||Low SRM/<br>Low PE<br>(7)|Low SRM/<br>High PE<br>(13)|High SRM<br>Low PE<br>(10)|W<br>High SRMI<br>High PE<br>(6)|Low<br>SRM<br>(20)|High<br>SRM<br>(16)|Low<br>PE<br>(17)|High<br>PE<br>(19)|Low<br>Income<br>(19)|MKidle<br>Income<br>(17)|Total<br>(36)|
|---|---|---|---|---|---|---|---|---|---|---|---|
|_Sector objecives (cont)_||||||||||||
|Internal efficiency||||||||||||
|Primary|43|54|40|67|50|50|41|58|47|53|s0|
|Postprimary|43|46|30|33|45|31|35|42|42|35|39|
|External efficiency||||||||||||
|Primary|14|0|40|33|5|38|29|11|21|18|19|
|Postprimary|14|31|50|17|25|38|35|26|32|29|31|
|_Sector financng_||||||||||||
|Redisrbute|86|77|100|33|80|75|94|63|95|59|78|
|CosUeffcienlcy|86|92|30|67|90|75|82|84|89|76|83|
|Newsources|71|77|70|17|75|50|71|58|68|59|64<br>|
|Costrecovery|71|77|100|50|75|81|88|68|79|76|78|
|Public spending||||||||||||
|Increase|86|69|20|17|75|19|47|53|53|47|50<br>|
|Maintain|14|31|80|83|25|81|53|47|47|53|50|

SRM: Sector resource mobilization PE: Primary enrollment rate Note: Numbers in parentheses denote total<sup>number of countries in each category, one report per country.</sup>
# ANNEX V: SECTORS CONSIDERED IN REPORTS

||Education|Health|Human<br>Resources|Water|Housing|Agriculture|Manufacturing|Mining|
|---|---|---|---|---|---|---|---|---|
|Bangladesh|X|X||X||x|||
|<br>Boliia|X|X|||||||
|Botswana|||X|||X|X||
|Burkina Faso|X||||||||
|Cameroon|X|X||||x|||
|CAR|||X|||x|||
|Colombia|X|X|||||||
|Costa Rica|X|X||X||X|||
|C8te d'ivolre|X|X||||X|X||
|Ghana|X|X||X|X|X|X|X|
|Guatemala|X|X||x|x|x|||
|Guinea|X||||||||
|Haiti*|X|X||X||X|||
|Honduras|X|X||X|X|X|||
|Jordan|X|X||X|X||||
|Kenya|X|X||||X|||
|Lesotho|X|X|X|X|X|X|X||
|Madagascar||X||||X|||
|Malawi *|X|X||X|X|X|||
|Man|X||||||||
|Mexico *|X|X||X|X|X|||
|Morocco|X|X|||X|X|X|X|
|Mozambique|X|X||||X|||
|Niger|X||||||||
|Nigeria|X||||||||
|<br>Pakistan*|X|X|||||||
|Peru-|X|X||X||X|X|X|
|Phflippines|x||||||||
|Rwanda|X|X||X||X|X|X|
|Senegal|X|X||||x|||
|<br>SlerraLeone*|X|X|||X|X|X|X|
|Tanzania-|X|X||X|X|X||X|
|Tunisia|X||||||||
|Turkey|X||||||||
|Zambia|X|X||||X||X|
|Zimbabwe'|X||||||||

79
||Industry|Energy/<br>Power Transportaton Communicatio|Urban<br>ns Developmen|lnfrastructurel<br>t<br>Works|
|---|---|---|---|---|
|aangladesh*<br>Bolivia*<br>|X|X<br>X<br>X||X<br>|
|Bttwana||||X|
|Burkina Faso|||||
|Cameroon||X|X||
|CAR||||X|
|Coombi||X|||
|CostaRica||x<br>X<br>x|||
|Ctte d'1volre'|||||
|Ghana||X<br>X||X|
|Guatemala||X<br>X<br>X|X||
|Guinea|||||
|H4aliI||X<br>x|X||
|Honduras||X<br>X<br>x|||
|Jordan||X|||
|Kenya||x<br>x|||
|<br>Lesotho|X|X<br>X|X|X|
|Madagascar||X|||
|<br>Malawi||X<br>X||X|
|Manl|||||
|Mexlco|X|X<br>X<br>X|||
|Morocco||X<br>X<br>X|||
|Mozambique||X|||
|Nger|||||
|Ngeria|||||
|Pakistan|||X||
|Peru '||X|||
|Philippines|||||
|Awanda||X<br>X|x||
|Senegal|X|X<br>X<br>x|x||
|<br>Sierra Leone||X<br>X<br>X|||
|Tanzanla*|X|X<br>X<br>X||X|
|T unlsia|||||
|Turkey|||||
|Zambla'<br>|X|X<br>X<br>x|||
|ZInbabwe|_||_||

80
Other sectors included in reports:

|Bangladesh:|Natural resources|
|---|---|
|Bolivia:|Social Security<br>|
|Cote d'lvoire:|Population, Finance<br>|
|Haiti:|Electric Power, Public Industrial Enterprises|
|Malawi:|Forestry|
|Mexico:|Marketing & Storage|
|Pakistan:|Population<br>|
|Peru:|Electric Power, Petroleum|
|Sierra Leone:|Tourism|
|Tanzania:|Natural Resources|
|Zambia:|Roads, Development Administration<br>|
|Zimbabwe:|Defense,**Public**Enterprises|

81
# PRE Working Paper Series

||T AiAhQD|||Contact<br>for paper|
|---|---|---|---|---|
|WPS496|Issues in Evaluating Tax and<br>Payment Arrangements for Publicly<br>Owned Minerals|Robert Conrad<br>Zmarak Shalizi<br>Janet Syme|August 1990|A. Bhalla<br>37699|
|WPS497|The Measurement of Budgetary<br>Operations in Highly Distorted<br>Economies: The Case of Angola|Carlos Elbirt|August 1990|T. Gean<br>34247|
|WPS498|The Build, Operate, and Transfer<br>('BOT") Approach to Infrastructure<br>Projects in Developing Countries|Mark Augenblick<br>B. Scott Custer, Jr.|August 1990|D. Schein<br>70291|
|WPS499|Taxing Foreign Income in Capital-<br>Importing Countries: Thailand's<br>Perspective|Chad Leechor<br>Jack M. Mintz|September 1990|A. Bhalla<br>37699|
|WPS500|Projecting Fertility for All Countries|Eduard Bos<br>RodolfoA. Bulatao|September 1990|V. Altield<br>31091|
|WPS501|Tax Systems in the Reforming<br>Socialist Economies of Europe|Cheryl W. Gray|September 1990|L. Lockyear<br>36969|
|WPS502|Patents and Pharmaceutical Drugs:<br>Understanding the Pressures on<br>Developing Countries|Julio Ncgues|September 1990|M. T. Sanchez<br>33731|
|VWPS50|3 Household Production, Time<br>Allocation, and Welfare in Peru|John Dagsvik<br>Rolf Aaberge|September 1990|M. Abundo<br>36820|
|WPS504|Applying Tax Policy Models in<br>Country Economic Work:<br>Bangladesh, China, and India|Henrik Danl<br>Pradeep Mitra|September 1990|A. Bhalla<br>37699|
|WPS505|Creating the Reform-Resistant<br>Dependent Economy: The CMEA<br>International Trading Relationship|Arye L. Hillman<br>Adi Schnytzer|September 1990|CECSE Staff<br>37176|
|VVPS50|6 Changes in Food Consumption<br>Patterns in the Repub4c of Korea|Merlinda D. Ingco|September 1990|A. Daruwala<br>33713|
|WPS5C7|Poverty in Poland, Hungary, and<br>Yugoslavia in the Years of Crisis,<br>1978-87|Branko Milanovic|September 1990|A. Bretana<br>37176|
|WPS508|A RMSM-X Model for Chile|Luis Serven|September 1990|S. Jonnakuty<br>39074|
|WPS509|The Childbearing Family in<br>Sub-Saharan Africa: Structure,<br>Fertility, and the Future|Odile Frank|September 1990|B. Rosa<br>33751|
PRE Working Paper Series

||v0|AutAhor|Do|Contact<br>for paper|
|---|---|---|---|---|
|WPS510|Public Expenditure Reviews for<br>Education: The Bank's Experience|Antoine Schwartz<br>Gail Stevenson|October 1990|C. Cristobal<br>33640|
|WPS51 1|The Macroeconomic<br>Underpinnings<br>of Adjustment Lending|Fred Jaspersen<br>Karim Shariff|October 1990|A. Oropesa<br>39075|
|WPS512|||||
|WPS513|||||
|WPS514|Restrictive Labor Practices in<br>Seaports|Alan S. Harding|October 1990|A. Joseph<br>33743|