Cancelling the caps: Why the EFA movement must confront wage bill caps now

Cancelling the caps: Why the EFA movement must confront wage bill caps now

IMF conditions preventing the recruitment of new teachers have dubious macroeconomic benefits

IMF loan criteria are currently threatening the achievement of Education for All, this paper contends. While EFA and MDG initiatives have resulted in a rapid expansion of the numbers of children in education, agreements between 18 developing countries and the IMF that cap the public sector wage bill are preventing the recruitment of new teachers. The result is increasing class sizes and a decline in education quality.

The paper documents the impact of wage bill caps in the 23 Fast Track Initiative (FTI) endorsed countries, 10 others that are soon to be endorsed and a further 8 African countries that have recently committed to developing ambitious education plans. It notes that nearly half of children out of school are in countries with wage bill caps.

It then critiques the macroeconomic policy prescriptions of the IMF. It argues that:

  • excessive cuts to public expenditure in an effort to lower inflation can result in lower economic growth. The report cites economists, including some within the IMF, who argue that modest inflation rates (below 20%) need not harm economic growth and may enable expenditures that will increase growth
  • debts incurred for social expenditures on education and health need not harm an economy, particularly over a short period, whereas IMF prescriptions to reduce deficits can reduce economic growth
  • the short-term focus of the IMF leads it to disregard the long-term effect of policies, such as the effects on economic growth of higher expenditure on education

Case studies include the effect of caps in Sierra Leone, and the negative effects on quality resulting from the promotion by the World Bank and the IMF of non-professional teachers in Niger, Nepal, Guatemala, India, Malawi and Mali.

Finally, the paper concludes with an examination of the efforts of Mozambique’s Ministry of Education and 18 in-country donors to achieve the removal of the wage bill cap in that country. It argues that this example demonstrates the importance of action by civil society, governments, donors and the FTI in having the caps removed.