LAO PDR LIFTS THE FOG ON EXTERNAL FINANCING

  By Ousmane Diouf, Programme Specialist, IIEP 

 

How does external financing complement public funding for education in this Southeast Asian country? Where does the funding go and how stable is it? A project aimed at developing national education accounts uncovered the answers to these vital questions. 

Over the past three years, the Lao People's Democratic Republic has been involved in an international project aimed at supporting countries in developing a national education account (NEA). Key questions explored have included how much does the government and its partners spend on education; what do they pay for; and what is the average level of financing per-student across different levels in formal and non-formal education? 

NATIONAL EDUCATION ACCOUNTS

An NEA is a comprehensive information system that helps produce reliable and transparent data on education spending from all sources, including government, household and external funders across all education levels. Having all financial flows in a system compiled under one coherent framework is important for all countries committed to offering fee-free basic education and implementing the broader Education 2030 agenda. However, many countries – including Lao PDR – have long struggled with scarce information on education financing. To help address this, IIEP together with the IIEP Pôle de Dakar and the UNESCO Institute for Statistics launched a project in 2013 to support the development of an NEA in eight countries.

CLARITY EMERGES

Prior to developing the NEA, education officials in Lao PDR did not have information on expenditure rates at the different levels of education, or data on how external funding compared to government spending. The NEA revealed that financing data for projects and programmes managed outside of the national system were not always available. It also found that donor interventions were not always coordinated and were generally fragmented. For example, from 2009 to 2014, donor disbursements often fell short of commitments by more than 40 per cent.

OVERALL AID DECLINES, BUT NOT FOR EDUCATION

External aid to Lao PDR has dropped from $651.94 million in 2010 to $232.15 million in 2014. However, this has had less of an impact on external financing for education. In fact, the proportion of aid directed towards the sector increased from 5.29 per cent ($32.60 million) in 2010 to 13.58 per cent ($31.52 million) in 2014.

EXTERNAL VS. PUBLIC

The NEA aimed to establish how much of the total public education expenditure is supported by development partners. 

The data revealed that this figure can fluctuate year to year. In 2009, it amounted to 24 per cent of the total education cost. It then decreased to 21 per cent in 2010 and to 15 per cent in 2011. The percentage of external expenditure peaked in 2012 at 25  per cent, before dropping to a low of 7 per cent in 2014.

PUBLIC EXPENDITURE TOPS EXTERNAL FUNDING

The NEA also revealed that external education expenditure as a percentage of the country's Gross Domestic Product (GDP) was always less than one per cent, making this contribution to education less than public expenditure, which has been on the rise in Lao PDR. The most notable jump was from 2012 to 2013 when public expenditure increased by 94 per cent.

HOW IS EXTERNAL FUNDING USED?

In 2014, the NEA showed that external education funding is mainly directed towards four categories: scholarship and support to families, teaching and learning materials, capital, and other recurrent operations. NEAs are also used to know how much is spent at different educational levels. In Lao PDR, it was revealed in the 2014 analysis that the highest external expenditure per-student occurred in technical and vocational training. On average, $407.64 was spent per student, over 71 times more than a student from primary school ($5.71). Combined with public funding, the expenditure per technical and vocational training student ($919.26) still remained higher than that for higher education ($752.01) and primary students ($168.22).

MATCHING RESOURCES WITH PRIORITIES

Overall, the exercise in developing an NEA in Lao PDR indicated that resources are not always directed towards priorities. To help address shortfalls, policy-makers in the country are working to improve coordination and are inviting donors to pool funds for better resource allocation. Going forward, the institutionalization of the NEA is also key to securing sustainability in education financing.

 

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