Fiscal Space and Public Spending on Children in Burkina Faso

Abstract

Despite high growth rates in recent decades, Burkina Faso is still a poor country. The government acknowledges the need for a stronger commitment to reach the Millennium Development Goals (MDGs), particularly regarding the reduction of poverty. At the same time, the Burkinabe budget deficit has grown in recent years in response to various crises which have hit the country. There are strong pressures to rapidly reduce this budget deficit, but there are active concerns about how this will be achieved. The country thus faces difficult choices: how to ensure better living conditions for children, attain the millennium goals and ensure they have a better future in the present budgetary context? To answer this question, three policy interventions were identified: (i) an increase in education spending, (ii) a school fees subsidy and (iii) a cash transfer to households with children under the age of five. The same total amount is injected into the economy in each of the three cases, facilitating comparison between the three scenarios. The discussions also made it possible to identify the three financing mechanisms that appear most realistic: (i) a reduction in subsidies, (ii) an increase in the indirect tax collection rate and (iii) an extension of the timeframe to reduce the public deficit to ten years rather than five. The results indicate that increased public education spending helps raise school participation and pass rates, thus increasing the supply and education level of skilled workers, leading to a reduced incidence and depth of both monetary and caloric poverty. School fees subsidies have more differentiated effects on education: they promote children’s entry into school to a greater degree, but are less effective at inducing them to pursue their studies. Finally, the supply of skilled workers increases slightly, but their average level of education is lower than in the reference scenario. This type of intervention has a beneficial impact on poverty, greater than under increased public education spending. Cash transfers have a limited impact on educational behaviour, and thus on the supply of skilled workers, but substantially reduce the incidence and depth of poverty. The results are qualitatively similar under each financing approach. In sum, if the objective is to achieve improved education and economic performance, the best intervention appears to be to focus on increased public education spending. However, if reducing child poverty is prioritized, it is cash transfers to families that appear more suitable. Regardless of the intervention considered, the most suitable financing mechanism appears to be a temporary increase in the public deficit, because it is accompanied by a smaller negative effect on the quality of life of the most destitute.