IMF forecasts Africa’s population boom can fuel economic growth with investment in education

Business a.m.

The International Monetary Fund (IMF) has expressed optimism that demographic transition presents a significant opportunity for the economies of sub-Saharan Africa. However, reaping the dividends of this transition hinges on adequate investments in education by the respective countries.

The IMF, in its 2024 regional economic outlook, noted that the  region’s population is poised to double to two billion by 2050. The report highlighted that this rapid population growth is primarily driven by the expansion of the working-age population, those aged between 15 to 64 years old, whose numbers are projected to outpace all other age groups and serve as the primary catalyst for Africa’s dramatic demographic surge.

Despite laudable strides made in the field of education in sub-Saharan Africa, the IMF has cautioned that the region still lags behind other emerging markets and developing economies in terms of educational outcomes. 

It noted: “Nearly three in 10 school-age children do not attend school. For primary school students, the completion rate is around 65 percent, compared with a world average of 87 percent. And the literacy rate for those ages 15 to 24 is only 75 percent, below the nearly 90 percent rate in other emerging markets and developing economies. On top of this, pandemic-related school closures led to learning losses that in some cases reversed years of progress.”

The IMF’s analysis uncovered that government education budgets in the region were strikingly low, with the median expenditure equal to around 3.5 percent of the countries’ gross domestic product (GDP) in 2020. This falls short of the international benchmark of a minimum of 4 percent of GDP allocated to education, highlighting the substantial shortfall in funding that African countries need to address in order to bolster educational outcomes.

While the poor government spending on education in sub-Saharan Africa has been identified as a critical challenge in the region’s quest to meet the Sustainable Development Goal (SDG) of universal primary and secondary school enrollment by 2030, the IMF’s latest analysis noted that this goal may necessitate a twofold increase in education expenditures as a proportion of GDP, including contributions from both public and private funding sources.

“Greater spending to improve access is important, but equally important is the effort to ensure that funds are efficiently used. Indeed, for the median country in sub-Saharan Africa, only 15 percent of students in primary and secondary school achieve more than the minimum learning outcome, while teacher training rates have fallen steadily for two decades,” it pointed out.

The IMF’s analysis disclosed further that investing in education represents a strategic long-term economic decision, as the returns on these investments are both substantial and enduring, easily offsetting the initial costs. Based on the latest Fiscal Monitor, the IMF found that increased government expenditure on education yields numerous economic benefits, including heightened productivity and foreign direct investment inflows. 

In response to the pressing need to ramp up education funding in sub-Saharan Africa, while navigating a tight fiscal climate and diminishing resources, the IMF advised governments in the region to safeguard their education budgets and adopt efficient financial management strategies to raise domestic revenue and ensure that the allocated funds are optimally utilized

For their part, donors and international organisations were encouraged to maintain or expand education funding support across the region. This, the IMF stated, will ensure the supply of a productive labor force that will be needed more and more urgently by a rapidly aging world, and help the region become one of the world’s most dynamic sources of new demand for consumption and investment.

On a broader level,the IMF said it is critical to better connect the region’s abundant human resources with the abundant capital in advanced economies and major emerging markets. 

The IMF added that given the right kind of policies, especially in education, sub-Saharan Africa could attract long-term flows of investment, technology, and know-how. And, given rapidly evolving technology and the landscape for jobs, this could unlock the full potential of the region’s young people, better equipping them for the future.