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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 contactefareport@unesco.org.

mailto:efareport@unesco.orgmailto:efareport@unesco.orgmailto:efareport@unesco.orgmailto:efareport@unesco.org

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Impact of the Financial Crisis on Education Sector Spending

and Government Policy Responses

Case note

By Manuel Francisco Lobo1

Edited by Katerina Kyrili and Matthew Martin of DFI

Acronyms

DSS Direct Support for Schools

EFA Education For All

EFA-FTI Education For All - Fast Track Initiative

EP1 1st Cycle of Primary Education

EP2 2nd Cycle of Primary Education

ESG1 Lower Secondary Education

ESG2 Upper Secondary Education

ESSF Education Sector Support Fund

ESSP Education Sector Strategic Plan

FTI Fast Track Initiative

GDP Gross Domestic Product

HDI Human Development Index

MDG Millennium Development Goals

Mt Metical / Meticais (National Currency)

MTEF Medium Term Expenditure Framework

PRSP Poverty Reduction Strategy Paper

TVET Technical and Vocational Education

1. Introduction and ContextMozambique 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 2007. 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 7th

grade in two periods of time. The first

1 The opinions expressed are the authors 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.

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have duration of 3 to 4 years. The entry level for these courses is the 12th

grade. Higher

Education is taught to students who completed the 12th

grade or the Medium Technical

Education and lasts 3 to 4 years.

Table 1. Evolution of students in the Education System

Years PrimaryEducation

(1st

/ 5th

) EP1

Primary Education(6

th/ 7

th) EP2

SecondaryEducation

(8th

/10th) ESG1

SecondaryEducation

(11th/12

th) ESG2

HigherEducation

2007 3,863,087 694,556 461,480 82,146 63,476

2009 4,305,290 839,310 662,387 139,985 75,457*

* data from 2008Source: Statistics from the Ministry of Education and Culture and Financing Education in Mozambique

Analyzing 2009-2010, Maputo, Ministry of Education and Culture, September 2009

In Mozambique most children in EP1, still study from the 1st

grade in Portuguese which is not

their mother tongue3, 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 BudgetIn 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

Meticais4

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 ofinternal 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 2007-2009

in percentage of the total state budget

Area Target/Expenditures 2007 2008 2009

General Education5

PRSP target 18% 19% 19.80%

Expenditures 22.70% 24.20% 19.30%

Exchange rate Mt/USD 25.66 24.24 26.55Source: Impact Analysis of the Structure of the Expenditures in the Economic Development and Life

Conditions in Mozambique, Sal&Caldeira and Ximungo Consultores, Maputo, December, 2009.

3 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 Educationand 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.

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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 theEducation 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 2008. 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 HigherEducation 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)2008 2009 2010

PRSP scenario 10,953.00 11,977.00 13,262.00

ESSP scenario 15,593.00 16,897.00 18,279.00

Total Education budget 16,928.63 18,940.44 18,553.84*

Total Education Expenditures 14,858.85 17,120.69Source: 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 theauthor used the simulation model, taking into account the number of pupils and teachers in the

system, until 2009 and the forecast for 2010. The information is provided in Table 4. This

shows that the expenditure per child in primary education is too low.

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Table 4 Education budget and expenditures6

2008-2010

Mozambique in millions, Mt

2008

budget

2008

outturn

2009

budget

2009

outturn

2010

budget

2010

forecast

outturn

Total Education Expenditures 16 928 14 858 18 940 17 120 18 553

General Education expenditure 14 930 12 948 16 377 14 751 14 751

1.By level of education (recurrent)

1.1.pre-primary education - - -

1.2.primary education (7 years)

8 5267

5189

8 626

5697

9 522

6143

1.3.junior secondary education (3 years) 807 1031 1305

1.4.secondary education (2 years)

2 529 1 898 2 0741.5 technical and Vocational Education

1.6 teachers training

1.7. literacy programmes

2.By type of educational expenditure

2.2.recurrent 8 526 8 526 8 626 8 626. 9 522

2.3.capital 6 332 4 422 7 750 6 041 5 229

GDP, nominal* 239 775 261 000

Inflation* 9.4 7 6.4 5.6*

Source: Budget Execution Reports 2008 and 2009. Estimations of the Primary and Junior Secondary Education were made by the author

using a simulation model

*Anlise do Impacto da Estrutura da Despesa sobre o Desenvolvimento Econmico e as Condies de Vida em Moambique

** MTEF 2009-2012

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 111.2 million and in 2009 USD 135.3 million8. This was inpart due to USD 79 million provided by the Catalytic Fund of the Fast Track Initiative (FTI),

for 2007 to 2010. 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.7There 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 2009-2010.

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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 broadlymaintains 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 2012. 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. Directforeign 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 2008-10this 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 2012.

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 2012. 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, 2008.

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expenditures in Education surpassed, by far the forecasts10

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, theexpenditures 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 hasnt 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

countrys 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 2010. 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 2009. 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 2004. 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 2009.

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 Econmico e as Condies de Vida em

Moambique, Dezembro 2009, pag 24.

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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.

Mozambiques 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

achieve11

, by 2015.

The ending of the current ESSP and donor-specific factors such as the closure of the CatalyticFund 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.

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7. AnnexesAnnex 1. Projection of Direct Budget support and Common Sector Funds including ESSF

(x1000 Mt)

2009 2010 2011 20121 Direct Budget Support 9 351 754 13 502 024 13 229 594 13 067 475

2 Common Funds 8 771 368 8 714 130 8 342 291 7 119 277

2.a ESSF 3 646 740 2 566 610 2 698 211 2 262 081

Credits

line 1+2 18 123 122 22 216 154 21 571 885 20 186 752Source: Medium Term Fiscal Scenario, 2010-2012, provided by the Programme Aid Partnership Secretariat

(www.pap.org.mz)

Annex 2 MTEF Projected state budget with 4.3% GDP growth in 2009

2009 2010 2011 2012

Internal financing 47 728,60 48725,2 53172,7 60097,8

External financing 39 138,40 46443,1 51659,5 57662,1

Total 86 867,00 95 168,30 104 832,20 117 759,90Source: Medium Term Fiscal Scenario, 2010-2012

Annex 3. MTEF Projected state budget with 6,1% GDP growth in 2010

2009 2010 2011 2012

Internal financing 49 865,50 52 429,00 55 232,00 61 306,60

External financing 39 138,40 46 443,10 51 659,50 57 662,10

Total 89 003,90 98 872,10 106 891,50 118 968,70Source: Medium Term Fiscal Scenario, 2010-2012

http://www.pap.org.mz/http://www.pap.org.mz/http://www.pap.org.mz/

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8. Bibliography:1) Human Development Report 2009 -Overcoming barriers: Human mobility and

development, UNDP 2009

2) 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 toMinistry of Education, Maputo, 2010;

8) Financing Education in Mozambique Analyzing 2009-2010, Maputo, Ministry ofEducation and Culture, September 2009.

9) FASE Audit Report, Maputo, Ministry of Education and Culture, Maputo, September2009.

10)Impact Analysis of the Structure of the Expenditures in the Economic Developmentand Life Conditions in Mozambique, Sal&Caldeira and Ximungo Consultores,

Maputo, December, 2009.

11)Education for All, Fast Track Initiative, Ministry of Education, March 2003;12)Education and Culture Strategic Plan 2006-2011, Ministry of Education and Culture,

Maputo, June 2006;

13)Presentation of final result of 2007 Census, November 2009,http://www.ine.gov.mz/censo2007

14)2007 State Budget, http://www.dnpo.gov.mz/orcamento/leioe2007.htm

15)2008 State Budget, http://www.dno.gov.mz/oe08.html16)2009 State Budget, http://www.dnpo.gov.mz/orcamento/2009/oe2009.html17)Balance of Economic and Social Plan 2009, Maputo February 201018)Statistics of the Ministry of Education, 2009 and 201019)Medium-Term Fiscal Scenario 2010-2012, 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 2006

9. People Interviewed:1. Manuel Rego, Planning Director, Ministry of Education;2. Ldia Meque, Maputo Focal point for the Education Cooperation Partners.

Maputo, June 2010

http://www.ine.gov.mz/censo2007http://www.ine.gov.mz/censo2007http://www.dnpo.gov.mz/orcamento/leioe2007.htmhttp://www.dnpo.gov.mz/orcamento/leioe2007.htmhttp://www.dno.gov.mz/oe08.htmlhttp://www.dno.gov.mz/oe08.htmlhttp://www.dnpo.gov.mz/orcamento/2009/oe2009.htmlhttp://www.dnpo.gov.mz/orcamento/2009/oe2009.htmlhttp://www.dnpo.gov.mz/orcamento/2009/oe2009.htmlhttp://www.dno.gov.mz/oe08.htmlhttp://www.dnpo.gov.mz/orcamento/leioe2007.htmhttp://www.ine.gov.mz/censo2007