Impact of the Financial Crisis on Education Sector Spending and Government Policy Responses: Case note (Mozambique)

Transcription

1 2011/ED/EFA/MRT/PI/05 Background paper prepared for the Education for All Global Monitoring Report 2011 The hidden crisis: Armed conflict and education Impact of the Financial Crisis on Education Sector Spending and Government Policy Responses: Case note (Mozambique) Manuel Francisco Lobo 2010 This paper was commissioned by the Education for All Global Monitoring Report as background information to assist in drafting the 2011 report. It has not been edited by the team. The views and opinions expressed in this paper are those of the author(s) and should not be attributed to the EFA Global Monitoring Report or to UNESCO. The papers can be cited with the following reference: Paper commissioned for the EFA Global Monitoring Report 2011, The hidden crisis: Armed conflict and education. For further information, please contact

2 Impact of the Financial Crisis on Education Sector Spending and Government Policy Responses Case note By Manuel Francisco Lobo 1 Edited by Katerina Kyrili and Matthew Martin of DFI Acronyms DSS EFA EFA-FTI EP1 EP2 ESG1 ESG2 ESSF ESSP FTI GDP HDI MDG Mt MTEF PRSP TVET Direct Support for Schools Education For All Education For All - Fast Track Initiative 1st Cycle of Primary Education 2nd Cycle of Primary Education Lower Secondary Education Upper Secondary Education Education Sector Support Fund Education Sector Strategic Plan Fast Track Initiative Gross Domestic Product Human Development Index Millennium Development Goals Metical / Meticais (National Currency) Medium Term Expenditure Framework Poverty Reduction Strategy Paper Technical and Vocational Education 1. Introduction and Context Mozambique is one of the countries with the lowest Human Development Index (HDI). The United Nations report, places the country at 172 out of 182 countries, among the last 10 in the world. This indicator is a composite measure of living a long and healthy life, being educated and having a decent standard of living. Mozambique still has high illiteracy rates. As per the data from the 2007 Population Census, from the total population aged 15 and over, 64.2% of women and 34.6% of men cannot read nor write, which amounts to a national average of 50.4%, one of the world highest illiteracy rates. In Mozambique, according to the data from the 2007 population census, 34.3% of the population aged between 6 and 17 years was not attending school in Similarly, in 2009, the gross completion rate of Primary Education was 54.5% 2. The failure and dropout rates are still high, contributing to the non-achievement of the targets set by the country in order to increase the completion of the seven grades of primary education and other Dakar objectives. The Education for All, Fast Track Initiative (EFA-FTI) was intended to contribute to solve the problem of primary school completion until the 7 th grade in two periods of time. The first 1 The opinions expressed are the author s and do not necessarily reflect the views of Government of Mozambique. 2 Completion rate in primary education measures the number of children that complete 7 grades of primary school divided by 12 years old population. 1

3 period would be the universal completion of the first five grades of primary education by 2010 and then move towards the universal completion of the 7 th grade of primary education by The Government intended to tackle simultaneously all levels of the education system, that is, to address the educational system as a whole. The reforms proposed by EFA-FTI were incorporated in the Education and Culture Sector Strategic Plan (ESSP 2006/2011) and implemented during its term. However, despite the efforts made by the Ministry of Education, the challenges of the sector persist and efforts should continue to be made to achieve the expected results. One of the greatest challenges of the sector is maintaining the high levels of financing (internal and external) for the education system, in order to raise the quality of education and the completion rate, mainly in the primary education. 2. Objectives of the case note By answering a set of questions presented in point 3, this case note will contribute to an overall study exploring the impact of the financial crisis on education spending. It will offer a qualitative analysis of the different intervening factors and how they affect Mozambique. The main objectives of this case note are: a. To document in detail the impact of the crisis on national budgets; b. To provide information that explains the ways the government chose to react to the reduction of financing and spending, if any, and its impact; and c. To present a number of Government policy responses that have had a positive impact. 3. Questions to be answered: To answer the questions, the case note will assess the situation of the Education Sector, and the budgets from 2007 to 2009 and will assess the perspectives for the coming years. The case note will also look into the forecasts of budgets through the MTEF until In particular, the study shall focus on pre-primary, and the first level of secondary Education. However, whenever possible, the answers will take into account the possible changes in budgets and government responsiveness at all levels of the education system. 4. The Education System in Mozambique The National Education System in Mozambique includes: the Pre-school Education which is taught to children aged 0 to 5 years; the Primary Education which is divided in two cycles (1 st to 5 th grade and 6 th to 7 th grade); Secondary Education, also divided in two cycles (8 th to 10 th grade and 11 th and 12 th grade); and Technical and Vocational Education which is taught to students who have completed at least the 7 th grade. Official entry age in primary education is 6 years. Teachers are trained in specific courses. For the Primary Education courses, it is required that teacher candidates complete 10 th grade and for the first cycle of Secondary Education candidates must have completed the 12 th grade. These courses have duration of one year. Teachers for middle level (to teach 11 th and 12 th grades) are trained in universities and courses 2

4 have duration of 3 to 4 years. The entry level for these courses is the 12 th grade. Higher Education is taught to students who completed the 12 th grade or the Medium Technical Education and lasts 3 to 4 years. Years Primary Education (1 st / 5 th ) EP1 Table 1. Evolution of students in the Education System Secondary Primary Education (6 th / 7 th Education ) EP2 (8 th /10 th ) ESG1 Secondary Education (11 th /12 th ) ESG2 Higher Education ,863, , ,480 82,146 63, ,305, , , ,985 75,457* * data from 2008 Source: Statistics from the Ministry of Education and Culture and Financing Education in Mozambique Analyzing , Maputo, Ministry of Education and Culture, September 2009 In Mozambique most children in EP1, still study from the 1 st grade in Portuguese which is not their mother tongue 3, under the trees, sitting on the floor and in overcrowded classrooms, conditions under which the quality of education is not easy to achieve. 5. The State Budget and the Education Budget In general terms, the State Budget has been growing at an accelerated pace every year. Between 2007 and 2009, the State Budget has nominally grown by 38%, from 70 billion Meticais 4 to 98 billion Meticais. The rhythm of budget growth, despite the world financial crisis, has been increasing, as a result of increased GDP and external financing. Slightly over half of the State Budget (SB) continues to be supported by external funds. Over the years, the education budget has been growing on a regular basis, both in terms of internal financing from the State Budget and external financing from grants to the Education Sector Support Fund (ESSF) and other sources. Education spent more than what was originally planned in the Poverty Reduction Strategy Paper (PRSP) in 2007 and 2008, as can be seen in Table 2 below. Table 2. PRSP Budget Projections and Expenditures in Education in percentage of the total state budget Area Target/Expenditures General Education 5 PRSP target 18% 19% 19.80% Expenditures 22.70% 24.20% 19.30% Exchange rate Mt/USD Source: Impact Analysis of the Structure of the Expenditures in the Economic Development and Life Conditions in Mozambique, Sal&Caldeira and Ximungo Consultores, Maputo, December, In 2004 Bilingual Education was introduced in Basic Education by the approved New Curriculum of Basic Education. 4 For Exchange rates see table 2. 5 General Education includes Literacy programmes, Adult Education, Primary Education, Secondary Education and Technical and Vocational Training (TVET). Pre-school Education in under the responsibility of the Ministry of Women and Social Actions and is mostly financed by the private and community sector. 3

5 The reason for this increase in the state budget devoted to education was to respond to the growth in the number of students enrolled and the consequent need for classrooms, teaching materials, teachers to match the increase of students and to comply with the student/teacher ratio set by the indicators agreed by partners intervening in the sector. Since 2007 the sector is recruiting about 10,000 teachers per year which meant that in 2009, it has achieved the target for the student/teacher ratio in Primary Education, an important quality indicator of the Education Sector Strategic Plan. The school construction programme has been decentralized to the provinces in order to reduce costs. The annual review reports from 2007 to 2009 show that total spending has increased by 24%. In 2009, 16.1 billion Mt were allocated to the Education Sector and 14.4 billion were spent, more than 3% than in Overall, from the budgets allocated to Education, about 87% are allocated to the General Education. Table 3 shows the budget scenarios of the PRSP and the ESSP. From this table is possible to conclude that there were substantial differences in planned budgets of the PRSP and the ESSP. This is because in the PRSP, the budget did not include other activities such as Higher Education and Culture. The total expenditures accounts for all the activities of the ESSP, including Culture. In the table 3, the sector scenario is lower than what it was budgeted to the sector. The expenditures in 2008 were less than what was projected in the ESSP scenario, but in 2009 this was changed and the sector spent more then what was projected in the ESSP scenario. The 2010 budget is slightly higher than what was projected in the ESSP scenario, but less than the 2009 expenditures, reflecting in part the financial crisis. In 2008, the sector spent 88% of what was budgeted and in 2009 the budget execution improved to 90% of the budget. Table 3 Planned budgets in PRSP, ESSP and budgets from 2008/2010 (Million Mts) PRSP scenario 10, , , ESSP scenario 15, , , Total Education budget 16, , ,553.84* Total Education Expenditures 14, , Source: Education Sector Strategic Plan (ESSP) and Budget Execution Reports 2008 and 2009 *State Budget 2010 There is no detailed published information on the budgets per level of education. In order to estimate the share of primary and junior secondary education in the recurrent budget the author used the simulation model, taking into account the number of pupils and teachers in the system, until 2009 and the forecast for The information is provided in Table 4. This shows that the expenditure per child in primary education is too low. 4

6 Table 4 Education budget and expenditures Mozambique in millions, Mt 2008 budget 2008 outturn 2009 budget 2009 outturn 2010 budget 2010 forecast outturn Total Education Expenditures General Education expenditure By level of education (recurrent) 1.1.pre-primary education primary education (7 years) junior secondary education (3 years) secondary education (2 years) 1.5 technical and Vocational Education 1.6 teachers training 1.7. literacy programmes 2.By type of educational expenditure recurrent capital GDP, nominal* Inflation* * Source: Budget Execution Reports 2008 and Estimations of the Primary and Junior Secondary Education were made by the author using a simulation model *Análise do Impacto da Estrutura da Despesa sobre o Desenvolvimento Económico e as Condições de Vida em Moçambique ** MTEF The ESSF has been growing annually since 2007, which shows the capacity of the Ministry of Education to mobilize external funds for the sector. In 2007 the total ESSF budget was USD 55.8 million USD, in 2008, USD million and in 2009 USD million 8. This was in part due to USD 79 million provided by the Catalytic Fund of the Fast Track Initiative (FTI), for 2007 to The amount available to spend in ESSF in 2009 was USD 185 million, resulting from funds received in 2009 and the balance brought forward from 2008, and at the end of 2009, the Ministry of Education had not spent 20% of the funds. Most of the shortfalls in absorption by the education sector reflect external funds that finance mostly investment especially for classroom construction. The State Budget Execution report shows that in 2008 the sector spent 90.2% of the internal funds, but only 68.6% of the external funds. In 2009, these figures improved to 97% and 73.2% respectively. The sector has improved its absorption capacity considerably in recent years, which led to the increase in education sector budget support aid,. Still, more work needs to increase the absorption capacity of the sector. In general, the sector spends more easily when in paying salaries using its own internal funds, than in investment where it is not easy to use funds due the capacity to implement procurement regulations and donor process conditionalities. With this data is possible to conclude that until 2009 the sector had not significant shortages of funds to implement its ongoing programmes: indeed it spent less than the budget. However, 6 The Education Budget and Expenditures include only the budget of the Ministry of Education and Provincial Directorates of Education. This budget does not include Higher Education and Culture, and is not discriminated by levels of education. 7 There is no information on pre primary education spending, since it is mostly by private community schools. 8 The data from 2007 and 2008 were taken from the 2009 ESSF Audit report and the one from 2009 from Financing Education in Mozambique

7 its increasing absorptive capacity and the continuing needs to increase spending to reach the MDGs, mean that there will be a need for a continuing major increase in spending in future. According to government financing forecasts, problems with financing may arise from 2010 onwards. Already the budget allocated for education in 2010 is lower in nominal terms than in 2009, reflecting the winding down of classroom investment programmes. This is in the context of large expenditure cuts of 1% of GDP across government, so education broadly maintains its share of government expenditure. However, the Medium Term Fiscal Scenario shows that there will be reductions in the external financing to ESSF from 3.6 billion Mt in 2009, to 2.2 billion in In contrast, external budget support to the Government will increase from 18.1 billion Mt to 20.billion in the same period (Annex 1): Government needs to ensure that it channels maximum funding to education if the EFA targets are to be met. 6. The financial crisis and the education budget and expenditures. In Mozambique people depend mostly on subsistence agriculture. The economic crisis has affected mostly the people that work in formal jobs in Mozambique or in South Africa. Direct foreign investment has lead to the construction of MOZAL Aluminium Smelter, Sasol (Natural Gas) Kenmare (Heavy sands) and Vale do Rio Doce (Coal), large projects of intensive capital. These projects create few jobs, and do not generate significant revenues for the budget, since they benefit from tax exemptions. Thus, consecutive years of growth at 7%-8% p.a. have not induced wide effects in the material conditions of families or in their activities" 9. The financial crisis may have affected the export capacity of these large companies but has had no important effects in the State Budget, because they are tax-exempt. At the same time, the financial assistance provided by Cooperating Partners to the state budget continues to be an important source of funding for Mozambique. For more than 20 years the state budget has been financed by external funds in more than 50%, During this assistance was not reduced, and in the MTEF the government expects that the Cooperating Partners will maintain more than 45% of financing to the budget until Education also benefits from external assistance and it has been increasing even in the years of the crisis. The MTEF expects a reduction of the external financing to the Education budget in 2011 and This is a direct consequence of the fact that Catalytic fund will close this year and of the European Code of Conduct on Division of Labour, that is leading to the Netherlands and Denmark phasing out their education programmes. It also partly reflects the fact that some Partners cannot provide information on forecast disbursements for more than 2 years. Until 2009 the financial crisis has not affected the State Budget or even the Education Sector. Since the crisis did not impact in the budgets and expenditures in the education sector, there was no need for specific interventions to address this issue. The new policies on teachers training, construction and secondary education introduced by the Ministry of Education from 2005 until 2009 were a follow up on the reforms that began with the FTI and not a direct consequence of the crisis. The Report on the Impact Analysis of the Structure of the Expenditures in the Economic Development and Life Conditions in Mozambique concludes that from 2006 to 2009 the 9 Sustainable Growth and Development, Prakash Ratilal,

8 expenditures in Education surpassed, by far the forecasts 10 in the PRSP. The report provides a table that shows that during this period the PRSP projected between 18% to 19% of the state budget for education, while the expenditures grew from 21.1% to 24.2% of the budget. During the period of 2008 to 2009 the GDP as well as the internal budget continued to grow and this explains also the increase in the education budget during this period. In general, the expenditures in other priority areas of the PRSP were similar to those originally projected. Although the level of financing is important, the ability to reach the EFA goals will depend on many factors, like education government policies, capacity to implement reforms related to improving the teaching conditions, internal distribution of the education budgets, internal capacity to deliver quality education to all, particularly at local level, and factors that are not directly related to spending (like the construction capacity, capacity to mobilize people to understand the value of education and to send their children to school). In the case of Mozambique the financial crisis hasn t had a direct impact in the level of education financing and thus is possible to conclude that this is not, until now, a major factor that can hamper the country s ability to reach this goal. Moreover, during this period the Education sector mobilized an important financial support from the FTI Catalytic Fund of USD 79 million for 3 years, from 2007 to The amount of the FTI funds for the sector account for about 20% of all funds of the ESSF during the period in analysis. The crisis, in general, did not change the capacity of the households to provide the necessary inputs for their children to participate in school, since the majority of Mozambican people depend on subsistence agriculture and not on formal employment, primary education is provided for free in primary schools. In 2010 the sector received fewer funds from the State Budget, if compared with This might not be the final figure for all year, since it is normal that during the year the budget can be changed. In the case of Education the government did not develop any particular policy to respond to the crisis. In the case of Mozambique, the government already provides free textbooks for children in primary schools, direct support to schools and the parents do not have to pay fees to send their children to the primary schools, since the fees were abolished in Schools receive Direct Support to Schools (DSS) to compensate them from the money they lost with the abolishment of the fees. The implementation of these policies continued without change during the period of 2007 to To accomplish the EFA goals the Government is implementing the curriculum reform in primary education, training primary education teachers including female teachers in an accelerated manner, the accelerated school construction programme for primary education schools. The Government launched a literacy programme using radio. The government expects that these programmes will cover about 1 million people a year and will increase the access and reduce sharply the illiteracy rates during the next years. In the area of gender the government is supporting policies to reduce the gender gap in primary education with awareness campaigns in the communities and the hiring of female teachers to schools. For the 10 Analise do Impacto da Estrutura das Despesas no Desenvolvimento Económico e as Condições de Vida em Moçambique, Dezembro 2009, pag 24. 7

9 Government the Technical Education is a priority. At the same time secondary education is also expanding very quickly. The Ministry of Education is launching this year a programme for Pre-school education in order to include more children in this level that serves now only 4% of the children of the correspondent age. Mozambique s educational expenditures have not, so far, been directly affected by the crisis. This fact does not mean that the sector does not need more funding. In fact the education expenditures per child in primary education are very low, about USD40 per child. It looks as though Mozambique will maintain its attainment of 100% primary enrolment, but is unlikely to reach 100% completion of primary education by 2015, due to high failure and dropout rates aspects closely related with the quality of education provided. It might be feasible to reach 100% completion of 5 years of primary education, with continued high investments in teacher training, teaching materials, school construction and awareness for parents of the importance of completing primary education, but 7 years completion may prove to be very hard to achieve 11, by The ending of the current ESSP and donor-specific factors such as the closure of the Catalytic Fund and departure of two major donors, mean that current forecasts are of a fall in education sector funding from donors from 2010 onwards. This is at a time when government has been sharply increasing its absorptive capacity, and has major additional programmes which need to be implemented - such as continued school construction, pre-school education, school materials, and the Direct Support to Schools programme for furniture and refurbishment - if EFA goals are to be reached. The Government of Mozambique, with the support of its cooperating partners will apply for renewed Catalytic Funds to cover the ESSF gaps. 11 In 2009, the completion rate for the EP2 was 48%, according to the Ministry of Education Statistics. 8

10 7. Annexes Annex 1. Projection of Direct Budget support and Common Sector Funds including ESSF (x1000 Mt) Direct Budget Support Common Funds a ESSF Credits line Source: Medium Term Fiscal Scenario, , provided by the Programme Aid Partnership Secretariat ( Annex 2 MTEF Projected state budget with 4.3% GDP growth in Internal financing , , , ,8 External financing , , , ,1 Total , , , ,90 Source: Medium Term Fiscal Scenario, Annex 3. MTEF Projected state budget with 6,1% GDP growth in Internal financing , , , ,60 External financing , , , ,10 Total , , , ,70 Source: Medium Term Fiscal Scenario,

11 8. Bibliography: 1) Human Development Report Overcoming barriers: Human mobility and development, UNDP ) Briefing Note on Financing for the Education Sector in Mozambique in 2010, Maputo, Ministry of Education and Culture, September 2009; 3) Joint Report 2007, Ministry of Education and Culture, Maputo 2008; 4) Joint Report 2008, Ministry of Education and Culture, Maputo 2009; 5) Joint Report 2009, Ministry of Education, Maputo 2010; 6) Report on Monitoring ESSP Indicators, Ministry of Education and Culture, Maputo 2010; 7) Partners commitments from 2010 to 2013 Information matrix from partners to Ministry of Education, Maputo, 2010; 8) Financing Education in Mozambique Analyzing , Maputo, Ministry of Education and Culture, September ) FASE Audit Report, Maputo, Ministry of Education and Culture, Maputo, September ) Impact Analysis of the Structure of the Expenditures in the Economic Development and Life Conditions in Mozambique, Sal&Caldeira and Ximungo Consultores, Maputo, December, ) Education for All, Fast Track Initiative, Ministry of Education, March 2003; 12) Education and Culture Strategic Plan , Ministry of Education and Culture, Maputo, June 2006; 13) Presentation of final result of 2007 Census, November 2009, 14) 2007 State Budget, 15) 2008 State Budget, 16) 2009 State Budget, 17) Balance of Economic and Social Plan 2009, Maputo February ) Statistics of the Ministry of Education, 2009 and ) Medium-Term Fiscal Scenario , Ministry of Planning and Development, Ministry of Finance, September 2009, 20) State Budget Execution Report, 2008, Ministry of Finance, 2009; 21) State Budget Execution Report, 2009; Ministry of Finance,2010; 22) Education and Culture Sector Strategy Paper (ESSP), Ministry of Education and Culture, Maputo People Interviewed: 1. Manuel Rego, Planning Director, Ministry of Education; 2. Lídia Meque, Maputo Focal point for the Education Cooperation Partners. Maputo, June