Affiliated Network for Social Accountability (ANSA-Africa)

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Confronting the contradictions: The IMF, wage bill caps and the case for teachers
April 2007
ActionAid

The case against the IMF on education

In the world’s poorest countries many children have gone without quality education for far too long, and as a result, the human capital that these countries need to grow and develop sustainably is still in desperately short supply. One reason is that the key ingredient to learning is missing: there are not enough trained teachers. Our research in Malawi, Mozambique and Sierra Leone shows that a major factor behind the chronic and severe shortage of teachers is that International Monetary Fund (IMF) policies have required many poor countries to freeze or curtail teacher recruitment.

Ceilings are placed on the public sector wage bill¹ to keep it from pushing up spending or spiralling out of control. IMF policies have led to excessively low wage bill ceilings at the very same time that the World Bank and other donors are pushing poor countries to rapidly expand enrolments, so as to achieve the Millennium Development Goal (MDG) of getting all children into primary school by 2015.

This report recognises that wage bill ceilings are necessary: there are always limits that need to be set and no government should spend irresponsibly. However, questions remain unanswered: How are the ceilings calculated? By whom? Are they too low as a result?

In all three countries, the IMF exercises considerable influence in the setting of annual ceilings on the budget and consequently on the wage bill. A recent IMF report conceded that between 2003 and 2005 it included wage bill ceilings as a notable criterion in its loan arrangements with 17 countries in Asia, Central America and sub-Saharan Africa, including Malawi, Sierra Leone and until recently, Mozambique (Fedelino et al 2006).² In other countries with an IMF loan arrangement, the Fund does not directly require a wage bill ceiling. Instead it targets single-digit inflation rates and low fiscal deficit levels, effectively limiting the size of the government budget relative to gross domestic product (GDP), including the budget for teachers. Based on these overall budgetary restrictions, the Ministry of Finance (MoF) may set specific ‘caps’ on the number of teachers and health workers that can be hired. However, the formula or criteria used in setting the ceilings remain unclear. Did the MoF and the IMF assess the number of teachers needed to ensure quality education? Was there any analysis of rising enrolment rates in primary and secondary schools? Was there any consideration of the impact of these ceilings, especially on how they discourage girls’ schooling and compromise long-term development goals? It seems not.

Footnotes:

The public sector wage bill is a line item in any national budget that covers the central government payroll.

In four additional countries wage bill conditionality related only to structural reforms – for example, computerising the payroll.