Transaction Costs in Aid

Zambia is one of the poorest, most heavily indebted and most aid dependent countries in Africa. Between 2000 and 2002, Zambia received an annual average of $595m in net ODA; in 2002 ODA represented 18% of national income, and over 40% of total public expenditure. 43% of the education budget is externally funded, and more than 60% of the budget for basic education. In recent years, the top five donors in volume terms have been the World Bank, IMF, EC, Japan and UK. In total, some eighteen official donors are currently active, or have recently been active in the Zambian education sector. Zambia faces some of the region’s greatest human development challenges. Its HIVAIDS infection rate has reached 21%, and health indicators have declined markedly in recent years. The education system suffers from extremely low quality, and inadequate access, especially in rural and peri-urban areas. Over 600,000 primary aged children are estimated to be out of school, and today’s generation of teenagers are more likely to reach adulthood unable to read and write than their parents’ generation. The HIV-AIDS pandemic has contributed severely to educational decline, by impacting both on the state’s capacity to deliver basic services and on households’ ability to utilise those services.