Authorities Propose National Trust Fund As Fix For Alarming Education Finance Deficit

Federal authorities have proposed the establishment of a national trust fund (NTF) to bridge alarming financial deficits in the education sector.

A strategy document published by the Ministry of Education, led by Berhanu Nega (Prof.), notes education spending has dropped from 4.5 percent of GDP in 2014 to 2.2 percent in 2023 owing to “shifting national priorities,” declining external funding, and pressure stemming from inflation and debt servicing.

This is despite government spending on education rising from 10 billion Birr in 2008/9 to 240 billion Birr in 2023/24.

“Over the past few decades, the government has made significant efforts to expand access to education for all. However, fluctuations in government funding—caused by shifting national priorities—pose a major challenge,” reads the document, which notes the government finances three-quarters of the entire education sector.

“This downturn in budget share coincided with rising debt servicing obligations and weak revenue mobilization capacity, contributing to a sharp decline in education spending as a share of GDP,” reads the document. “Addressing these formidable challenges demands substantial and sustained financial investment.”

Education’s falling share in the government budget has been compounded by declining external support, according to the Ministry.

“Although education has remained a stated priority, competing demands from other areas—especially debt servicing—have reduced the share of the national budget allocated to education. This decline was amplified by reductions in both private and external funding,” reads the document.

It proposes the establishment of a national trust fund, under the supervision of the Education and Finance ministries, as a tool to bridge widening finance gaps.

Officials envision pooling resources from government grants, mandatory contributions from state-owned enterprises and Ethiopian Investment Holdings (EIH), pension funds, large taxpayers, regional administrations, and a new education tax that could see businesses pay one percent of profits into the NTF.

The Ministry is also counting on philanthropic donations, public support, and technical assistance from global tech and IT firms for digital learning resources or scholarships, according to the document.

It stipulates that up to 20 percent of the fund’s assets will be held in liquidity reserves.

The Ministry document also reveals significant declines in gross enrollment rates for grades 7-8 (from 69 percent to 66 percent) and secondary education (43 percent to 35 percent).

An alarming 15-20 percent of students are dropping out of the education system, it highlights, while one in 10 children never access formal education.

“These trends suggest that while access to education has improved, retention and progression to secondary education remain weak, potentially deepening inequalities and hindering human capital development,” reads the document.

It outlines a growing divide between urban and rural learning.

“Significant disparities in education resource distribution were driven primarily by geography, with urban school-age individuals receiving nearly twice the resources of their rural peers. Income-based differences were smaller but still notable in 2022/23, as the richest 20 percent received about 30 percent more than the poorest 20 percent,” reads the document.

Previous reports indicate that thousands of schools in conflict-afflicted areas across the country, particularly in the Amhara, Tigray, and Oromia regions, remain defunct or closed, leaving millions of children with no access to education.