The Role of Government Education Spending in Low and Lower-Middle Income Countries in a Post-Covid World

Government spending on education has become a priority action globally to meet the 2030 Sustainable Development Goal (SDG) of free, equitable, and quality primary and secondary education for all. Prior to the Covid-19 pandemic, governments in low and middle-income countries had increased education expenditures to approximately 4.45% of Gross Domestic Product (GDP) in conjunction with an increased share of education expenditures in overall government spending. Using panel data analysis, this chapter investigates the impact of education spending of 78 low and lower-middle income economies and 111 upper-middle and high-income countries on education outcomes at primary, secondary, and tertiary levels of schooling. The study finds that despite additional channels of external funding such as Official Development Assistance loans, it is government spending across all levels of educational enrollments, primary, secondary, and tertiary, that has had a greater impact on education outcomes. We find that government spending on education as a share of GDP has contributed the most toward achieving global development goals. We also find that the divergence in educational outcomes between low and lower-middle income countries versus high-income countries will continue to persist unless governments make a concentrated effort in implementing policies that are geared toward secondary and tertiary levels of schooling. While the onset of the Covid-19 pandemic has resulted in most economies constraining their government spending on education, this study estimates that at the very least, government allocations for education need to be maintained at pre-Covid-19 levels for economies to achieve the 2030 SDG targets.