ISLAMABAD: Pakistan will benefit from a financing partnership bet­ween the Asian Development Bank and a sovereign-backed Swiss Foun­dation, International Finance Facility for Education (IFFEd), to receive concessional education funding.

ADB has signed an agreement with IFFEd that will enable at least $500 million in new concessional education funding for lower middle-income countries in Asia and the Pacific.

Pakistan is among the 10 countries of the region that are currently eligible for IFFEd funding. Besides Pakistan, the other nine countries are: Bangla­desh, India, Mongolia, Papua New Gui­nea, the Philippines, Sri Lanka, Timor-Leste, Uzbekistan, and Vietnam.

IFFEd-funded education projects can support ADB programmes at any level from early childhood development and school education to technical and vocational training, skills development and tertiary education. Under the financing partnership, IFFEd will guarantee $125 million of ADB’s sovereign loan exposure across all sectors, known as a synthetic portfolio, and provide an initial $50m in grants.

By blending IFFEd’s guarantees to ADB with grants that will comprise 10 per cent of every loan, the first-of-its-kind arrangement facilitates a four times leverage ratio of the guarantee, boosting the amount of capital ADB can lend while lowering borrowing costs for the bank’s developing member countries.

“Education is the cornerstone of modern, prosperous, and inclusive so­­cieties, and we are pleased to announce this partnership with IFFEd,” said ADB Vice-President for Sectors and Themes, Fatima Yasmin.

“By pooling catalytic and concessional financing, this initiative means our lower middle-income developing member countries can scale up their investments in education and skills — vital to building knowledge-based economies - along with other sectors at the same time.”

Lower middle-income countries face an education crisis. Over 50 per cent of students in these countries are not able to read simple text by age 10 despite attending school, and graduates do not have the skills to find jobs, leaving employers unable to fill vacancies.

As countries move from lower to lower middle-income status, they tend to get caught in a financing “missing middle” where they are no longer eligible to receive grants but cannot afford non-concessional financing — forcing a difficult decision of where to invest, exacerbated by limited domestic financing.

By bringing concessional or grant resources to developing countries seeking to strengthen their education systems, the ADB-IFFEd partnership’s key innovation lies in the fact that it will help ADB’s developing member countries prepare for a future characterised by digital transformation, climate change, demographic transitions, and rapid urbanisation.

IFFEd’s sovereign donors include Canada, Sweden, and the United Kingdom, while the Atlassian Foundation, Jacobs Foundation, Porticus, Rockefeller Foundation, and the Soros Economic Development Fund (the investment arm of Open Society Foundations) have provided seed capital. IFFEd, which benefits from a strong credit rating, will initially focus on Asia and the Pacific, and Africa, in collaboration with multilateral development banks (MDBs).

“Investing in education and skills in lower middle-income countries — home to nearly half of the world’s children and youth — is key to powering long-term economic growth and making progress on global health, climate, and equity goals,” said IFFEd founding chief executive officer Karthik Krishnan.

“IFFEd has been recognised by the G20 MDB Capital Adequacy Framework Review as one of the most significant development finance innovations in the past decade and delivers seven times more impact than traditional grants.

ADB played a key role in shaping the IFFEd instrument and as our first founding MDB partner, ADB is showcasing its unwavering commitment to alleviating poverty and powering economic growth in Asia and the Pacific,” added Krishnan.

Published in Dawn, September 29th, 2024