The HIPC Initiative:
What Will It Do for Education?
The Heavily Indebted Poor Countries (HIPC) initiative, launched in 1996 by the World Bank and the IMF, seeks to reduce the external debt of the poorest, most heavily indebted countries by placing debt relief within the framework of a strategy for poverty reduction. Eighteen African countries1 are participating in the initiative. To what extent can this financial largesse contribute to education? The authors urge countries to re-examine the very foundations of their education systems and analyze their shortcomings. The resources freed by the HIPC initiative can help to enlarge existing systems; however countries should also take the opportunity to bring about the structural changes needed to establish more effective systems that will yield the desired social results.
Since the early 1980s, and notably
as a result of the oil shocks of the
previous decade, many African
countries have faced a variety of macro-economic
disorders: budget deficits, balance
of payment deficits, and inflation.
These led to the formulation of structural
adjustment programs with the Bretton
Woods institutions. These programs,
which probably underestimated the scope
of the problem, started from the idea that
macroeconomic equilibrium was a fundamental
structural objective without
which no development action would be
possible. Moreover, the size of the deficits
made it necessary to take vigorous
action: although the financial partners
agreed to contribute in the short term,
they required in return that stringent economic
policies be adopted by the states
concerned, since such outside financing
could not be provided in a sustainable
way.
The limits of structural adjustment programs
While the existence of disequilibria and
the need to finance them should not be
neglected, these programs have been
criticized on two complementary
grounds. First, even after years of
struggle, many countries have not managed
to attain the desired macroeconomic
equilibrium. Second, the programs
often entailed "collateral damage" in
terms of both economic growth and funding
for the basic social sectors. The
analyses made at the time (particularly
those originating outside the international
institutions involved) emphasized
that these programs could not succeed as
long as the countries were obliged to repay
an amount of foreign debt (interest
and capital) that was growing continually,
owing to interest accrual, and sometimes
reaching unbearable levels. The analyses
also stressed that while macroeconomic
equilibrium was regarded as the main objective,
the only truly acceptable objective
is that of human development and
poverty reduction. Having expressed
these criticisms, we should nevertheless
point out that experience has shown macroeconomic
equilibrium and growth of
national output to be necessary (though
not sufficient) conditions for the success
of poverty reduction initiatives.
Reduce debt, alleviate poverty
This was the context of the developed
countries' first debt reduction initiative,
in 1996; the initiative was subsequently
enhanced in June 1999 at the Cologne
summit of the G7. September of the same
year saw the emergence and development
of the idea that the resources freed up
each year through debt reduction should
be invested in actions and programs aiming
at substantial reduction of poverty in
the countries concerned. The strategic
framework for poverty reduction would
be the reference document for all actions
in favor of developing (or emerging)
countries. The framework would be prepared
locally by the government of each
country, after extensive consultation with
the stakeholders concerned and with civil
society (the collaboration of all outside
partners was considered advisable).
The country would then be offered
debt relief, subject to certain conditions.
In particular, it would have to: (i) meet
the eligibility criteria (low per capita income,
net present value of debt too high
in relation to exports, annual debt service
exceeding to an unreasonable degree the
country's receipts from general and special
taxation); (ii) have an acceptably
democratic political environment (elections,
press, trade unions); (iii) have
achieved a minimal level of macroeconomic
stability, taking account of the
benefits of the initiative; and (iv) have developed
and begun to implement a poverty
reduction strategy.
Forty-one countries, including 33 in
Africa, are considered to meet the criteria
for both income level and debt burden.
Four of these countries (two in Africa)
are regarded as having sufficient
resources (notably oil) to cope reasonably
well with their debt repayment
schedules, and thus have not been selected
for the HIPC initiative. This lowers the
number of eligible countries to 37, of
which 31 are in Africa. Of these 37 theoretically
eligible countries, two (one in
Africa2) elected not to take advantage of
this initiative. To date, 22 countries (including
18 in Africa) have actually entered
the HIPC process. The remaining 13 countries (12 in Africa3) have not satisfied
all the eligibility criteria and are
not yet participants in the initiative.
The HIPC process and the resources involved
Once eligibility and the terms of implementation
have been determined, the
HIPC process is initiated by the so-called
"decision point" debt reduction paper.
This is a document submitted by the
World Bank to its Board of Directors and
by the International Monetary Fund to its
Executive Board. It examines the characteristics
and volume of debt relief as
well as the conditions that the country
will have to meet before final implementation
of the initiative. This point of
completion is referred to as "floating,"
to indicate that a certain amount of time
may pass before the country fulfils these
conditions, which include, among other
things, the adoption of certain global or
sectoral policies (good governance, decentralization
decisions, decisions to hire
new types of teachers or to purchase
medicines, etc.). Another condition is
that the country must formulate and begin
to implement a poverty reduction
strategy. The strategy is developed in two
stages: an interim strategy to begin with,
followed by preparation of a full Poverty
Reduction Strategy Paper (PRSP) defining
the medium-term program and the actions
to be taken in the first three years.
This national strategy, which will serve
as the basis for the country's own actions
as well as for its relations with all of its
technical and financial partners, is presented
to the World Bank's Board of Directors
and the International Monetary
Fund's Executive Board.
It may be noted that the strategic
framework for poverty reduction does
not apply to the HIPC countries alone:
its use has been extended to all the countries
that are eligible for IDA loans or
that might consider this instrument applicable
to their situations.
A first appraisal of the total resources
freed up in the context of the
HIPC initiative shows that, for the
22 countries which have reached the decision
point, the initiative will reduce the
total foreign debt stock by 45 %, from
US$44 billion to US$24 billion. For the
18 African countries, over the 2001-
2003 period annual debt service should
fall (with respect to 1998) from 17% of
exports to 8 %, from 3.3% of gross domestic
product to 1.8%, and from 26%
to 12% of government revenue from general
and special taxation.
These average figures should not
obscure the fact that the amount of debt
relief, in both absolute and relative terms,
varies rather widely from one country to
another. Initial debt situations were
highly varied (Zambia, for example, was
much more indebted than Burkina Faso),
whereas debt relief is calibrated according
to indicators which, though considered
acceptable for the future, are identical
for all the countries. This is why
some observers have expressed regret
that the initiative offers less relief to
those countries that have been the most
careful about accumulating debt (from
2000 to 2009, cumulative debt service
relief for Burkina Faso is expected to
amount to US$330 million, as against
US$1.8 billion for Zambia, even though
the two countries have roughly the same
population).
The consequences for education
Debt service relief is intended to free up
funding for programs and initiatives to
reduce the incidence of poverty. Education
is obviously one of the main areas
affected by the initiative (along with
health and rural development). To supplement
the previous macroeconomic presentation,
it can thus be helpful, before
implementation of the initiative, to compare
the amount by which debt service is
reduced to the volume of public spending
on the social sectors (education and
health). For the 18 African HIPC countries
that have reached the decision point,
the reduction in annual debt service corresponds
to about 50 % of public spending
on these two sectors. According to the
HIPC documents, the total annual volume
of public expenditure for the social sectors
in these countries should rise from
US$2.5 billion to US$3.4 billion as a re
sult of the initiative, an increase of 36%.
Here again, however, the financial impact
of the initiative can vary enormously from
one country to another: debt relief would
amount to only 20% of the volume of public
resources allocated to the social sectors
in Burkina Faso, as against 48 % in
Madagascar, 90% in Guinea and
Mozambique, and nearly 200% in Zambia.
Despite these great differences between
countries, the majority of them are
likely to allocate substantial resources to
the education sector. However, it will still
be necessary for the sector to demonstrate
that it can contribute effectively to
the objective of poverty reduction, because
other sectors will inevitably compete
for the resources released by the
initiative. This is an exceptional two-fold
challenge for the education sector: first,
to obtain some of the resources made
available by debt relief; second, and especially,
to use them in an efficient and
equitable way. The various parties supporting
the initiative do not regard it simply
as a financial contribution allowing
the countries to increase appropriations
for the social sectors (including education),
but as an operation allowing them
to obtain tangible improvements for their
populations, in particular for the groups
that are generally excluded.
Making better use of resources
Studies have shown that the educational
systems of most of the African HIPC
countries could make appreciably better
use (in terms of efficiency and in equity)
of the public resources allocated at the
national level. It follows that the additional
resources should not be used merely to
enlarge existing systems, but rather to
achieve tangible improvements for the
population. This requirement applies of
course to the HIPC countries themselves,
but also to their development partners,
which, having supported these countries
for some 30 years, bear some responsibility
for inefficient and inequitable use
of the national resources allocated to education.
The project-based approach, which
tends to finance activities having only a
marginal influence on the way national sys
tems function (foreign aid amounts to less
than 10% of national public financing, and
even less when private contributions are
taken into account) has had no real impact
on education systems' fundamental
structural aspects.
The current context allows a major
qualitative change in the way the functioning
of educational systems is approached.
The HIPC initiative encourages countries
to rethink the very foundations of their
systems rather than to seek marginal improvements.
The central idea is to induce
them to determine how to use the new
resources to bring about the structural
progress needed. The objective is, over a
15-year period, to build systems capable
of yielding the desired social results, and
to do so within a financial structure that
is sustainable over the long term. This re
quires substantial efforts in terms of
functional analysis of educational systems
and, in particular, analysis of the reasons
why the African countries, particularly
in Frenchspeaking Africa, have had
less success than their Asian and Latin
American counterparts in making public
resources yield tangible results for their
populations and economies. These efforts
are essential, both to identify the
education policies to be followed over
the next 10 to 15 years and to define
management procedures that enable the
conversion of available resources into
actual results. The stimulating effect of
debt reduction, in conjunction with the
role played by civil society, works
strongly in favor of structural decisions
that would have been difficult to make under
normal circumstances.
Defining appropriate strategies
It may be helpful to conclude with a description
of what seems to be a fairly
widespread strategy, adopted by most of
the countries participating in the HIPC
initiative. We begin with two observations:
(i) the main engine of poverty reduction
is economic growth, which
should therefore be promoted; (ii) it is
important that the poorest segments of
the population be able both to contribute
to growth and to seize the opportunities
arising from the improvement in the
country's overall situation. Human capital
plays a prominent role in this respect.
Where economic growth is concerned,
it should be noted that the African
HIPC countries are characterized by
dual economies: the majority of the
working population is employed in the
traditional sector (including agriculture),
and only a small (but increasing) proportion
works in the modern sector. The
sources of growth will necessarily be
found in these two sectors.
In the modern sector, experience
shows that growth depends first and foremost
on economic policies (exchange
rates, interest rates, social legislation, investment
code) and that human capital has
a crucial role to play. The private sector
must be able to find the skilled personnel
it needs, particularly graduates of institutions
for technical and vocational
education and higher education. Experience
also demonstrates, however, that the
absorption capacity of the domestic market
is a major constraint, and the human
capital produced in these important
sources of training must therefore remain,
in both quantity and quality, in line
with the demand expressed by the labor
market. All of the countries regard this
objective of matching education to demand
as difficult to achieve, but most
think that it is necessary.
The extensive literature on the traditional
sector emphasizes that quality
primary education, involving at least five
or six years of schooling, is the minimum
requirement for productivity gains in this sector and for the social development of
the country. Despite considerable effort, many countries still have a long way to
go. At the quantitative level, this observation
obviously applies not only to the
Sahel countries, for which progress in
this respect is essential, but also to a number
of countries in which school enrolment
rates are relatively high but a size
able percentage of the population nevertheless
does not complete primary
schooling. For example, Mozambique,
Benin, Malawi and many other countries
have gross rates of primary school enrolment
exceeding 80%, but it is estimated
that, at most, 20% of girls in rural areas receive a full primary education. It
seems in this respect that, since traditional
policies targeting conventional
forms of service provision have their limits,
new initiatives are being considered
within the framework of poverty reduction
strategies. Progress is also needed
at the qualitative level, because the goal
is not merely to have children formally
enrolled in school but to ensure that they
actually learn what they are supposed to
learn.
These quantity and quality considerations
suggest that the objective of providing
quality schooling, at least through
the end of the primary cycle, will be a
major component of countries' programs,
particularly in the context of the
fight against poverty.
Alain Mingat and Jee-Peng Tan
World Bank
Human Development-HIPC Team,
Africa Region
1. Eighteen African countries have reached the
"decision point": Benin, Burkina Faso, Cameroon,
Gambia, Guinea, Guinea-Bissau, Madagascar,
Malawi, Mali, Mauritania, Mozambique, Niger,
Rwanda, Senegal, São Tomé and Principe,
Tanzania, Uganda, Zambia.
2. Ghana has recently indicated its intention to
request HIPC debt relief.
3. Burundi, Central African Republic, Chad, The
Congo, Democratic Republic of Congo, Côte
d'Ivoire, Ethiopia, Liberia, Sierra Leone, Somalia,
Sudan, Togo.
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