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Challenging the IMF on education: why caps on teachers need to be lifted

Update to this id21 viewpoints, June 2007

David Archer, Head of International Education at ActionAid, looks at how the IMF has contributed to teacher shortages in developing countries.
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UNESCO estimates that 18 million new teachers are needed globally between now and 2015 to get all children into school in more or less acceptable class sizes (of no more than 40 children to 1 teacher). At least 2.4 million new teachers will be needed in sub-Saharan Africa. It is clear that massive new investments need to be made. But it is equally clear that this growth in spending is unlikely to be achieved according to new research by ActionAid: 'Confronting the Contradictions: The IMF Wage Bill Caps and the Case for Teachers'.

This research shows that the International Monetary Fund (IMF) imposes conditions on the public sector wage bill (through which teachers are paid), particularly across Sub Saharan Africa. In many countries where the IMF does not impose a direct ceiling on the wage bill, its' targeting of single-digit inflation rates and low fiscal deficit levels, still effectively limits the size of the government budget, including the budget for teachers. Governments feel they cannot ignore the IMF advice - because the IMF's judgement on the stability of countries has a dramatic impact on their capacity to attract foreign investment and aid.

Despite compelling evidence that education is one of the soundest long term economic investments a country can make, the IMF regards spending on education simply as 'consumption', not as a 'productive investment'. As such, education spending, especially on wages, is always something to be curtailed.

The ActionAid research asks whether, in setting these wage bill caps, the IMF and ministries of finance take into consideration rising enrolment rates in primary and secondary schools. Do the caps factor in the education goals that the country has committed itself to? Is there any consultation with ministries of education? It seems not.

'Confronting the Contradictions' is based on detailed case studies in Mozambique, Malawi and Sierra Leone. In Malawi the average class size is 72 children per teacher and to achieve its goals the government would have to more than double the teaching workforce - but this is impossible under present IMF conditions. In Sierra Leone, a post-conflict country, the government has agreed to such restrictive macro-economic targets that it will not be able to recruit urgently needed teachers to get all children into school. In Mozambique the government and donors successfully challenged the IMF to raise the wage ceiling - but this still falls short of real needs.

The impact of IMF constraints on wage bills is felt acutely by countries that experience rising enrolments owing to population growth or the abolition of user fees. When Kenya removed user fees in 2003, over 1.3 million children enrolled in school for the first time, but the government was not allowed to employ any more teachers owing to an IMF cap imposed since 1997. Class sizes rose and the quality of education plummeted.

This report argues that governments and national parliaments, not the IMF, are best placed to determine whether to set public sector wage bill ceilings. The level of these ceilings should be based on the achievement of education goals. To achieve this it calls for the following:

The IMF should stop attaching specific policy conditions to their lending and surveillance programmes, including on inflation levels, fiscal deficits and wage bills. Any advice they give must provide a range of policy options to enable governments to make informed choices about macroeconomic policies, wage bills and the level of social spending.
Governments should develop long-term education plans detailing the actual need for teachers to provide quality-learning outcomes for all children.
Donors need to keep their promises by committing to increased and predictable aid over the long term - this is particularly important for education where aid needs to be spend on recruiting new teachers. This aid needs to be front-loaded as it is needed now if all children are to complete primary schooling by 2015.
Civil society organisations need to develop their own economic literacy so they can better scrutinise government budgets, increase the sensitivity of budgets to the needs of girls, poor people and other excluded groups, and engage in discussions about alternative macroeconomic policies.

David Archer

Further Information
Head of International Education
ActionAid International
Hamlyn House
MacDonald Road
Archway
London N19 5PG, UK

ActionAid
Tel: +44 (0)20 7561 7561
Fax: +44 (0)20 7272 0899
Email: david.archer@actionaid.org

See also
'Confronting the Contradictions: the IMF, Wage Bill Caps and the Case for teachers', ActionAid, April 2007 (PDF) May 2007

Comment on this viewpoint by emailing id21viewpoints@ids.ac.uk

UPDATE to this id21 viewpoint, June 2007: The International Monetary Fund (IMF) responded to the ActionAid report 'Confronting the Contradictions' with a letter in May. ActionAid has now sent a detailed response to this letter (dowload in PDF). The IMF claims to be moving away from using explicit wage bill ceilings. ActionAid welcomes this but awaits details of the concrete steps that the IMF will take to implement this commitment. ActionAid also argues that there are other important steps that the IMF urgently needs to take. It needs to come to the table on education both nationally and internationally to show that it is serious about supporting increased investment in education. The IMF needs to recognise spending on education as a sound, productive economic investment rather than as pure "consumption." It needs to take a long term view rather than being focused on the short term. Most importantly the need to offer a range of policy options to governments and leave it up to national governments to set the macro-economic policies which will be most conducive to achieving national development goals.

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