Last month, global leaders in international development across government, charities, academia and the private sector convened in Washington D.C. for the World Bank/IMF Annual Meetings. Among topics such as high inflation dampening global growth and the threat of climate change reversing progress on poverty eradication, the global learning crisis was high on the agenda.

We heard the President of the World Bank Group, David Malpass, explain the disastrous impacts the COVID-19 pandemic has had on children’s education, with the number of children across low- and middle-income countries in learning poverty – defined as not being able to read or write a simple text by aged 10 – growing by a third to an estimated 70% between 2019 and 2022. The biggest threats to education are felt by those children experiencing the intersecting threats of COVID-19, climate change and conflict.

Many solutions were discussed, including the role of education technology, the importance of quality teacher training, and the need for education systems to identify and supply our youth with the skills demanded by the current and future job market – including digital and green skills.

These are all important points, but the giant elephant in the room is financing.

The truth is we already know many of the solutions, but we don’t have the money to fund them. According to UNESCO, the global education financing gap could be as high as $200 billion annually.

It was here – on financing services for children, and education specifically, where the Annual Meetings failed to make progress.

The most sustainable long-term source of funding for education is mobilized by governments themselves through domestic resource mobilization – the process through which governments raise, allocate and spend their own funds to provide services for the public.

Unfortunately, many of the world’s poorest countries are unable to ramp up education spending because they are being constrained by worsening debt burdens owed to wealthy countries and investors. New analysis from Save the Children shows that one-sixth of low- and lower middle-income countries spent more on servicing external debt than they did on education in 2020.

We’re not alone in sounding the alarm on the debt crisis – UNICEF has found that debt payments have exceeded health, education and social protection spending in 1 in 8 countries and Debt Justice have highlighted that 64 countries spend more on debt payments than on health.

According to the IMF’s own debt sustainability analysis, more than half of the world’s poorest countries are already in or at high risk of debt distress as of September 2022.

The debt crisis is constraining investment in children’s services and this will continue. Our new forecast shows that education spending is expected to stagnate at 17% of budgets across low- and lower middle-income countries, while interest payments alone are expected to absorb 10% of budgets by 2024, up from 7% in 2015.

Despite the growing debt crisis, progress appears to have stalled with G20 as their debt relief initiatives, such as the Debt Service Suspension Initiative (DSSI) and the Common Framework, have either stopped or been proven ineffective.

Forecast for spending on education vs. interest payments, low- and lower middle-income countries

Insufficient funding for education pushes the possibility of achieving SDG 4 by 2030 further and further out of reach. This is money that could be spent on recruiting and training more teachers, ensuring classrooms are filled with learning materials, as well as investing in COVID recovery, catch-up classes and interventions to continue to get all out of school children into school.

There are solutions, but governments and international development partners must act now. Save the Children is calling for three areas for action to improve the sustainability of education financing and ultimately achieve SDG 4:

1. Strengthen domestic resource mobilization by improving revenue mobilisation and spending efficiency. Governments must implement policies that increase the size of their budgets through progressive tax reform, and the share of the budget towards education to meet needs and fulfil international commitments, including allocating 20% of the budget on education.
2. Prioritize quality and equitable spending with a focus on improving learning for the most marginalized children, including through more and better ODA and climate finance.  Increasing the quantity of funding without increasing the quality of that funding is insufficient for achieving educational outcome targets. Governments should explore expenditure reprioritization towards early childhood development and basic education, focusing especially on the most marginalized groups of children and those living in poverty. Donors should fulfil commitments to allocate 0.7% of gross national income towards ODA, increase education’s share of ODA to 15%, and prioritize country programmable education ODA to empower recipient countries. Further, they should allocate 10% of humanitarian budgets towards education and increase climate finance - additional to ODA - to ensure children can continue learning in times of emergency.
3. Harness opportunities to channel more and better finance into education, including through ensuring debt sustainability, improving access to sustainable concessional loans, utilizing Special Drawing Rights (SDRs), and new forms of innovative finance. Fundamentally, education systems need more funding to achieve the aims set out in SDG 4. Sustainable education financing streams could be unlocked through debt restructuring in countries facing risk of debt distress; strengthened governance of the global sovereign debt system coupled with increased sustainable concessional loan-based financing; accelerating redistribution of the IMF’s SDRs to low- and lower middle-income countries, and accessing innovative finance, for example through the GPE Multiplier or the newly launched International Finance Facility for Education (IFFEd). Save the Children supports mechanisms that follow the principles of universalism, additionality, and debt sustainability.

Global leaders cannot afford to kick the can down the road any longer – we can and must unlock the funding necessary to fill the education financing gap and fulfil the right of children everywhere to a quality education.

Note: this blog was edited in June 2023 to fix an error in the data analysis on external debt servicing.