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The EFA 2011 Global Monitoring Report shows that education spending as a share of Gross Domestic Product (GDP) increased from 2.9% in 1999 to 3.8% in 2008 in low-income countries. In more than one third of low income countries the share of education expenditure in total government expenditure exceeds 20%. Moreover, households, especially in low income countries, account for a significant share of education expenditure. International aid to education has also been very significant (about US$ 30 billion between 202 and 2008) of which about 90% went to low income and low middle income countries. Despite the growing investment and commitment by governments, households and donors education finance continues to experience a huge financial gap. The 2010 EFA report estimates that the financial gap to reach the EFA goals to be US$ 16 billion annually until 2015.

There is no doubt that it is important to mobilise more funds for education to achieve the millennium development goals and beyond. However, more importantly the issue of effective utilization of the already huge and growing investment in education is of critical importance if gains in education are to be sustained over the medium to long-term. Countries and donors need a clear understanding of how education resources are linked to learning outcomes to make informed policy decisions toward improving the quality of education. The best way to measure this link is by constructing comprehensive national education accounts (NEAs) to track all financial resources for education and document their end use in detail While financial resources are by no means the sole driver to improve quality education, governments need to allocate sufficient funding to providers at the appropriate levels. Access to NEAs connected to learning outcomes and other drivers of learning.

Evidence shows that more financing is not the solution to the chronic problem of low quality education in many countries. There is also evidence that education finance in many countries continues to a large extent benefit the better-off groups, especially at the higher levels of the education ladder. Thus, improving the effectiveness and equity of education expenditure is yet an untapped potential for delivering quality education for all. Quality and equity of education outcomes hinges on a variety of factors including the level and quality of education inputs, the teaching, learning and assessment processes. The UNESCO General Education Quality analysis/Diagnosis Framework (GEQAF) deals with each of these education sub-systems and their inter-linkages. A well-functioning education financing system is one of the key enabling factors for the delivery of education quality for all.

This Analytical Tool [See the Full Version for more details] will deal with the education finance sub-system. The paramount question is:

How well have we designed our education finance system to enable the achievement of equitable and quality education outcomes? Through a set of structured questions, this Analytical Tool helps countries to undertake a diagnosis and analysis of their education finance system to identify potential strengths and challenges and design appropriate policies and measures to address quality and equity issues in the education sector. The diagnosis and analysis will focus on key areas of the education finance system covering adequacy of funding, financial allocation, distribution and utilization as well as system capacity for management of education finance.

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