Finance and Expenditures in Education

To ensure macro-economic stability, as well as to promote equitable economic growth, countries need to maintain public spending at a level consistent with their long-run financing ability while, at the same time, establishing transparent budget mechanisms that allocate and manage public resources equitably and reduce poverty. However, in the real world, public resource allocation decisions do not always reflect sound economic policies.

The World Bank, with its lending programs in numerous client countries, must ensure that borrowed World Bank funds reach the intended beneficiaries. World Bank Education Economists collaborate with experts from Country units and Poverty Reduction and Economic Management units to undertake economic and sector work (such as economic memorandums, poverty assessments and public expenditure reviews) as well as reports on specific issues in education to help with informed policy making in the sector.

Education policy research pays considerable attention to the productivity and efficiency of the education sector, in particular of government expenditure in the sector. Determining how governments and families can best finance and allocate scarce resources to produce quality education and the skills that individuals need for success, is an integral task of the education economists. The Education Sector Strategy Update (ESSU) also calls for integrating education into a country-wide perspective focusing on how education ties into the macro-economic context. It particularly emphasizes the need for close attention to fiscal policies and decentralization policies affecting school management and finance.

In this regard the education sector specifically seeks to answer the following questions in a country's public expenditute analysis:

• How much is spent on education and what is the share of the government's expenditure?
• How do governments finance the education sector and what do they finance?
• Is there equitable distribution of the public resources?
• Is the public getting its money's worth?
• Is the spending adequate and sustainable?