IMF Conditionality and Government Education Spending: The Case of 10 MENA Countries
Round 1
Reviewer 1 Report
Comments and Suggestions for AuthorsI carefully examined the study titled 'IMF CONDITIONALITY AND GOVERNMENT EDUCATION SPENDING: THE CASE OF 10 MENA COUNTRIES'. This paper essentially explores the impact of IMF-linked conditions on government education expenditures in the MENA region. It utilizes panel data spanning from 1990 to 2020 covering 10 MENA countries and applies a cross-national fixed effects regression model. Surprisingly, the findings indicate a positive relationship between IMF conditions and government education expenditures in the MENA region. While the study addresses a noteworthy and interesting topic, it has significant shortcomings. Therefore, I must express my indecision between rejection and major revision. Nevertheless, I am willing to give the authors a chance for revision. My suggestions are as follows:
1. IMF-related conditions need to be better defined and explained. There are some ambiguities present.
2. It is quite evident that the Introduction section is not well structured. This section requires a significant revision. By referring more to education reports from international institutions instead of short and incomplete paragraphs, the importance of the topic can be highlighted. Ultimately, the SDGs are globally significant, and education is a significant goal.
3. There is no need to explain the establishment of the IMF. This is a research paper, not a literature review. More focus could be given to IMF reform proposals regarding economic policies and their impact on social spending. I believe there is extensive literature on the impact of IMF prescriptions on education and health expenditures.
4. There are quite a few shortcomings in the Introduction section. What is the significance of the study? What gap exists in the literature? How does this study aim to fill that gap? What are its direct contributions? These questions need to be addressed. Otherwise, the value of the study is immeasurable.
5. Despite notable efforts regarding the selection of MENA, the explanations are quite disjointed. Many explanations have been made in different sections. My advice to the authors is to consolidate the MENA and period selection under a short subheading.
6. Arab Uprisings or Arab Spring? Arab Spring is a more widespread and accurate term. Am I mistaken?
7. Although the correlation matrix does not indicate multicollinearity, VIF analysis can be performed. Suitable tests for fitness are needed.
8. In addition to fixed effects, further analysis may be important for the robustness of the results. Robust analyses will demonstrate the reliability of the results.
9. Generally, it is expected that IMF austerity policies would reduce education and health expenditures. The results have shown otherwise. Although the authors attempt to support this with studies from the literature, the relationships should be examined in more detail. In other words, the mechanisms behind the results should be discussed in more detail.
10. Are there no limitations to the study? I did not see any explanation regarding limitations in the Conclusion section. Additionally, what lessons should policymakers in MENA draw from this study?
Author Response
Reviewer 1
I carefully examined the study titled 'IMF CONDITIONALITY AND GOVERNMENT EDUCATION SPENDING: THE CASE OF 10 MENA COUNTRIES'. This paper essentially explores the impact of IMF-linked conditions on government education expenditures in the MENA region. It utilizes panel data spanning from 1990 to 2020 covering 10 MENA countries and applies a cross-national fixed effects regression model. Surprisingly, the findings indicate a positive relationship between IMF conditions and government education expenditures in the MENA region. While the study addresses a noteworthy and interesting topic, it has significant shortcomings. Therefore, I must express my indecision between rejection and major revision. Nevertheless, I am willing to give the authors a chance for revision. My suggestions are as follows:
- IMF-related conditions need to be better defined and explained. There are some ambiguities present.
Response:
We thank the reviewer for raising this important point, and we appreciate the suggestion to clarify the ambiguities regarding the IMF-related conditions. We have revised the relevant part. Please see Table 3: Categories of IMF Conditions (by Type and Policy Area) in section 3.3.
- It is quite evident that the Introduction section is not well structured. This section requires a significant revision. By referring more to education reports from international institutions instead of short and incomplete paragraphs, the importance of the topic can be highlighted. Ultimately, the SDGs are globally significant, and education is a significant goal.
Response:
The reviewers are right regarding the need to refer to the importance of the education element of the SDGs in view of the existing literature. Please see the highlighted part in the introduction.
- There is no need to explain the establishment of the IMF. This is a research paper, not a literature review. More focus could be given to IMF reform proposals regarding economic policies and their impact on social spending. I believe there is extensive literature on the impact of IMF prescriptions on education and health expenditures.
Response:
We have already certainly taken this point into consideration. We have included additional studies examining the impact of IMF reform proposals on social spending in recipient countries, particularly health and education. These studies, and their findings, are highlighted in the literature review part, section 2.1.
- There are quite a few shortcomings in the Introduction section. What is the significance of the study? What gap exists in the literature? How does this study aim to fill that gap? What are its direct contributions? These questions need to be addressed. Otherwise, the value of the study is immeasurable.
Response:
The reviewer is right regarding this point. There is an extensive body of research on the IMF and the impact of its reform policies on government spending in recipient countries. However, the empirical literature regarding the impact of IMF policies on government spending in the context of the MENA region remains scant. Moreover, the impact of IMF policies on government education spending in the region remains a subject in its infancy. This paper highlights the importance of accounting for education when looking at the potential implications of IMF programs in recipient countries. Please see the highlighted part in the introduction.
- Despite notable efforts regarding the selection of MENA, the explanations are quite disjointed. Many explanations have been made in different sections. My advice to the authors is to consolidate the MENA and period selection under a short subheading.
Response:
The reviewer is correct regarding the dispersed explanations involving the MENA region. We have consolidated the explanations pertaining to the MENA region in section 3 (Government Education Expenditures and IMF Lending: The Case of the MENA Region) by introducing a new section, section 3.2 (the Political Economy of IMF Involvement in the MENA region). This section includes the historical overview of IMF involvement in the region which was removed from section 4 (Data and methodology).
- Arab Uprisings or Arab Spring? Arab Spring is a more widespread and accurate term. Am I mistaken?
Response:
We thank the reviewer for this note. Both terminologies are used interchangeably in the literature on the Arab region. However, the authors understand that the term “Arab Uprisings” is more widespread when it comes to the literature on the IMF and its involvement in the region.
A few studies/books on the topic:
- Kaboub, F., 2013. The end of neoliberalism? An institutional analysis of the Arab uprisings. Journal of Economic Issues, 47(2), pp.533-544.
- Sika, N.M., 2013. Dynamics of development and uprisings in the Arab World. Mediterranean Quarterly, 24(4), pp.43-67.
- Diwan, I. ed., 2014. Understanding the political economy of the Arab uprisings. World Scientific.
- Momani, B. and Lanz, D., 2014. Shifting IMF Policies since the Arab Uprisings.
- Zaid, A., Sherry, H., El-Badrawi, M. and Haber, J., 2014. Arab Uprisings & Social Justice.
- Hecan, M., 2016. Comparative political economy of the IMF arrangements after the Arab uprisings: Egypt and Tunisia. The Journal of North African Studies, 21(5), pp.765-793. Although the correlation matrix does not indicate multicollinearity, VIF analysis can be performed. Suitable tests for fitness are needed.
Response:
We acknowledge the need for adding a VIF analysis to complement the correlation matrix. For this purpose, we have added a table showing the VIF results. Please see it in the text (table 6). We have also reordered all tables in the paper accordingly.
- In addition to fixed effects, further analysis may be important for the robustness of the results. Robust analyses will demonstrate the reliability of the results.
Response:
Thank you for this suggestion. We agree that further robustness analysis is merited to enhance the credibility of our results.
Please see the highlighted text, section 5.2
- Generally, it is expected that IMF austerity policies would reduce education and health expenditures. The results have shown otherwise. Although the authors attempt to support this with studies from the literature, the relationships should be examined in more detail. In other words, the mechanisms behind the results should be discussed in more detail.
Response:
We appreciate the suggestion to discuss the mechanisms behind our results. As suggested in the paper, applying the conditions as part of an IMF-supported program may catalyze other channels that influence government spending, including foreign lending and aid, which can raise revenues and enhance the government's ability to engage in social spending. We have included an additional layer of nuance to our discussion of this result.
Please see the highlighted part, section 5.2
- Are there no limitations to the study? I did not see any explanation regarding limitations in the Conclusion section. Additionally, what lessons should policymakers in MENA draw from this study?
Response:
We thank the reviewer for this important remark. A paragraph outlining the limitations of this paper has been added toward the end of the conclusion. It is highlighted in yellow.
Author Response File: Author Response.docx
Reviewer 2 Report
Comments and Suggestions for AuthorsMajor Comments:
1. The paper uses the number of binding conditions as a proxy for IMF conditionality. However, this measure may not fully capture the complexity and intensity of IMF conditionality, which can vary across countries and programs. Exploring alternative measures of conditionality, such as the degree of policy change required or the stringency of enforcement mechanisms, could provide a more nuanced understanding of the relationship between IMF conditionality and education spending. Do you have access to other measures of conditionality?
2. While the authors control for several potential confounding factors, other relevant variables may not be included in the model. For example, political factors, such as government ideology or the strength of teachers' unions, could influence both IMF program participation and education spending. Including additional control variables could help isolate the causal effect of IMF conditionality.
3. The authors find a positive and statistically significant relationship between IMF conditionality and government education spending per capita. However, they acknowledge that this relationship may not be causal and could be due to other factors, such as increased donor financing. Further investigation is needed to disentangle the causal mechanisms underlying this relationship. Could you add a discussion about this limiting issue?
4. The paper concludes by suggesting that the IMF could play a more active role in promoting education spending in MENA countries. However, the policy implications could be more thoroughly explored. For example, the authors could discuss the potential trade-offs between macroeconomic stability and social spending, or the challenges of implementing IMF-supported education reforms in countries with weak governance or limited capacity.
5. The authors argue about the heterogeneity across MENA countries, but where is this reflected in the proposed model? The primary parameter (beta1) is consistent across all countries.
Author Response
Reviewer 2
- The paper uses the number of binding conditions as a proxy for IMF conditionality. However, this measure may not fully capture the complexity and intensity of IMF conditionality, which can vary across countries and programs. Exploring alternative measures of conditionality, such as the degree of policy change required or the stringency of enforcement mechanisms, could provide a more nuanced understanding of the relationship between IMF conditionality and education spending. Do you have access to other measures of conditionality?
Response:
As per the request of the authors, a new variable is added, law and order. This variable is derived from the ICRG tables (www.prsgroup.com). Every index ranges from 0 to 6, where the value 6 indicates no risk (citizens respects law and abide by the orders of the government) and zero indicates otherwise. This variable is expected to have a positive effect on educational spending. Please check the highlighted parts of tables 3, 4, 5, and Appendix E. Also, sections 4.2 and 5.2.
- While the authors control for several potential confounding factors, other relevant variables may not be included in the model. For example, political factors, such as government ideology or the strength of teachers' unions, could influence both IMF program participation and education spending. Including additional control variables could help isolate the causal effect of IMF conditionality.
Response:
As per the request of the authors, a new variable is added, government stability. This variable is derived from the ICRG tables (www.prsgroup.com). Every index ranges from 0 to 12, where the value 12 indicates no risk and zero indicates high risk. This variable is expected to have a positive effect on educational spending. Please check the highlighted parts of tables 3, 4, 5, and Appendix E. Also sections 4.2 and 5.2
- The authors find a positive and statistically significant relationship between IMF conditionality and government education spending per capita. However, they acknowledge that this relationship may not be causal and could be due to other factors, such as increased donor financing. Further investigation is needed to disentangle the causal mechanisms underlying this relationship. Could you add a discussion about this limiting issue?
Response:
It is also important to note that the impact of IMF conditions on education spending is context-specific and can vary depending on the specific country and conditions. The purpose of running a fixed effects model, however, is to control for the unobserved time-invariant heterogeneity across countries, which may affect education spending. Please see section 5.2.
- The paper concludes by suggesting that the IMF could play a more active role in promoting education spending in MENA countries. However, the policy implications could be more thoroughly explored. For example, the authors could discuss the potential trade-offs between macroeconomic stability and social spending, or the challenges of implementing IMF-supported education reforms in countries with weak governance or limited capacity.
Response:
We thank the reviewer for this important remark. A paragraph discussing the potential trade-offs between macroeconomic stability and social spending has been added toward the end of the conclusion. It is highlighted in yellow.
- The authors argue about the heterogeneity across MENA countries, but where is this reflected in the proposed model? The primary parameter (beta1) is consistent across all countries.
Response:
Fixed effect regression for panel data allows compensating for time-invariant unobserved heterogeneity at the individual level, resulting in more robust and accurate estimates (Thuy, 2023). The use of fixed effect panel data analysis offers a solid foundation for investigating the complex links between government spending, socioeconomic outcomes, and policy success. By controlling for unobserved heterogeneity and accounting for individual-specific effects, researchers can get more reliable insights into the influence of government spending on numerous aspects of society and the economy.
Please see section 4.2
Author Response File: Author Response.docx
Reviewer 3 Report
Comments and Suggestions for AuthorsComments to the manuscript economies-3049955
"IMF CONDITIONALITY AND GOVERNMENT EDUCATION SPENDING: THE CASE OF 10 MENA COUNTRIES”
Economies
This manuscript investigates the impact of IMF conditionality on government education spending in 10 MENA countries between 1990 and 2020. The author used a fixed effects model for the analysis. The results show that IMF conditionality has a significantly positive effect on government education expenditure. This manuscript also concludes that the IMF's financing arrangements in the MENA region can expand fiscal space for social expenditures, such as education.
This manuscript covers a long research period, providing comprehensive results. I believe the findings could make a significant contribution due to the specific and important nature of the topic. However, I have several comments to enhance the manuscript's quality:
1. At a glance, the tables in the manuscript and the appendix are still not neat. The author needs to improve them for neatness.
2. The motivation for why IMF funding is important in the introduction section is still weak. Additionally, it seems that the author needs to state the research gap and how this manuscript will fill that gap.
3. I think the author should add the manuscript's contributions to the introduction section.
4. The author organizes the literature review well. However, it seems that the author needs to add a hypothesis development section to clearly capture the research.
5. The transition between the discussion of Models 2 and 3 (Page 16) does not flow well. In addition, the explanation of controlling for year-fixed effects is good, however, it would be better if the author provided an example or a brief discussion on its specific relevance to the study.
Author Response
Reviewer 3
This manuscript investigates the impact of IMF conditionality on government education spending in 10 MENA countries between 1990 and 2020. The author used a fixed effects model for the analysis. The results show that IMF conditionality has a significantly positive effect on government education expenditure. This manuscript also concludes that the IMF's financing arrangements in the MENA region can expand fiscal space for social expenditures, such as education.
This manuscript covers a long research period, providing comprehensive results. I believe the findings could make a significant contribution due to the specific and important nature of the topic. However, I have several comments to enhance the manuscript's quality:
- At a glance, the tables in the manuscript and the appendix are still not neat. The author needs to improve them for neatness.
Response:
The reviewer is right regarding the clarity of the tables in the manuscript and appendix. This issue has been already take care of during the revision process.
- The motivation for why IMF funding is important in the introduction section is still weak. Additionally, it seems that the author needs to state the research gap and how this manuscript will fill that gap.
Response:
There is an extensive body of research on the IMF and the impact of its reform policies on government spending in recipient countries. However, the empirical literature regarding the impact of IMF policies on government spending in the context of the MENA region remains scant. Moreover, the impact of IMF policies on government education spending in the region remains a subject in its infancy.
Please see the highlighted section of the introduction
- I think the author should add the manuscript's contributions to the introduction section.
Response:
This paper highlights the importance of accounting for education when looking at the potential implications of IMF programs in recipient countries. Please see the highlighted part in the introduction.
Please see the highlighted section of the introduction
- The author organizes the literature review well. However, it seems that the author needs to add a hypothesis development section to clearly capture the research.
Response:
We thank the reviewer for this important remark. A paragraph discussing developing the hypothesis and the relevance thereof has been added at the beginning of section 4. It is highlighted in yellow.
- The transition between the discussion of Models 2 and 3 (Page 16) does not flow well. In addition, the explanation of controlling for year-fixed effects is good, however, it would be better if the author provided an example or a brief discussion on its specific relevance to the study.
Response:
We appreciate the suggestion to provide an example regarding the relevance of controlling for year-fixed effects to the study. To this end, a paragraph has been added at the end of section 5.2. It is highlighted in yellow.
Author Response File: Author Response.docx
Reviewer 4 Report
Comments and Suggestions for AuthorsThe abstract needs a brief introduction at the beginning before methodology.
Objectives and significance of research were missed.
Government education spending in the Middle East and North Africa (MENA) region varies widely across countries due to differences in economic conditions, political priorities, and demographic pressures. The criteria on choosing 10 MENA countries out of 19 economies was not clear. Elaborate why these 10 MENA economies were chosen with different contexts regarding economic and political instability.
IMF conditionality with two important mechanisms of Structural Adjustment Programs (SAPs), and Fiscal Austerity, were missed in your study.
Any research on IMF conditionality impact on education spending should review and consider two factors of, Reductions in public expenditure, and Reallocation and efficiency.
You mentioned that “The primary objective of this study is to disentangle the impact of IMF conditionality on education expenditure within a representative sample of ten Middle East and North Africa (MENA) countries actively participating in IMF programs” but the recent IMF approaches have shown an increased focus on protecting and enhancing human capital investment. Balancing fiscal discipline with the need for sustainable development remains a critical challenge for MENA countries engaging with the IMF.
Your methodology is vague and outdated. Explain the empirical model selected in your paper from Heckman (1979) and Stubbs et al. (2017).
The framework for your IVs and DV were not provided.
The conclusion was merely a summary of research without any contribution from authors. Revise it. The influence of IMF conditionality on government education spending in MENA countries was not highlighted as well as the tension between achieving fiscal stability and ensuring adequate investment in social sectors.
Author Response
Reviewer 4
- The abstract needs a brief introduction at the beginning before methodology.
Response:
We appreciate the suggestion to include a brief introduction at the beginning of the abstract. We have added it accordingly. It is highlighted in yellow.
- Objectives and significance of research were missed.
Response:
There is an extensive body of research on the IMF and the impact of its reform policies on government spending in recipient countries. However, the empirical literature regarding the impact of IMF policies on government spending in the context of the MENA region remains scant. Moreover, the impact of IMF policies on government education spending in the region remains a subject in its infancy. This paper highlights the importance of accounting for education when looking at the potential implications of IMF programs in recipient countries. Please see the highlighted part in the introduction.
- Government education spending in the Middle East and North Africa (MENA) region varies widely across countries due to differences in economic conditions, political priorities, and demographic pressures. The criteria on choosing 10 MENA countries out of 19 economies was not clear. Elaborate why these 10 MENA economies were chosen with different contexts regarding economic and political instability.
Response:
We thank the reviewer for this note. While other MENA countries have historically engaged with the IMF, only these 10 countries were involved in an IMF program or lending arrangement during the study period. This has been added at the beginning of section 4. It is highlighted in yellow.
- IMF conditionality with two important mechanisms of Structural Adjustment Programs (SAPs), and Fiscal Austerity, were missed in your study.
- Any research on IMF conditionality impact on education spending should review and consider two factors of, Reductions in public expenditure, and Reallocation and efficiency.
Response to (4) and (5):
We have already taken this point into consideration. We have included additional studies examining the impact of IMF SAPs on social spending in recipient countries, particularly health and education. These studies, and their findings, are highlighted in the literature review part in section 2.1.
- You mentioned that “The primary objective of this study is to disentangle the impact of IMF conditionality on education expenditure within a representative sample of ten Middle East and North Africa (MENA) countries actively participating in IMF programs” but the recent IMF approaches have shown an increased focus on protecting and enhancing human capital investment. Balancing fiscal discipline with the need for sustainable development remains a critical challenge for MENA countries engaging with the IMF.
Response:
Thanks to the reviewer for this important remark. Indeed, governments should strike a good balance between macroeconomic stability, namely fiscal discipline, and the need to meet the SDGs. This is a critical challenge that faces most countries around the world, especially developing countries. A paragraph has been added in the conclusion highlighting the importance of a nuanced approach to balance the need for economic stability with the imperative of sustaining social development.
- Your methodology is vague and outdated. Explain the empirical model selected in your paper from Heckman (1979) and Stubbs et al. (2017).
Response:
Fixed effect regression for panel data allows compensating for time-invariant unobserved heterogeneity at the individual level, resulting in more robust and accurate estimates (Thuy, 2023). The use of fixed effect panel data analysis offers a solid foundation for investigating the complex links between government spending, socioeconomic outcomes, and policy success. By controlling for unobserved heterogeneity and accounting for individual-specific effects, researchers can get more reliable insights into the influence of government spending on numerous aspects of society and the economy.
Please see section 4.2
- The framework for your IVs and DV were not provided.
Response:
This study's independent variables (IVs) and dependent variables (DVs) are chosen based on the theoretical foundations of the study, the research questions, and the particular objectives of the inquiry. Please see the highlighted text of section 4.2.
- The conclusion was merely a summary of research without any contribution from authors. Revise it. The influence of IMF conditionality on government education spending in MENA countries was not highlighted as well as the tension between achieving fiscal stability and ensuring adequate investment in social sectors.
Response:
The reviewer is right regarding the need to refer to the tension between achieving fiscal stability and ensuring adequate investment in social sectors. Accordingly, we have added a paragraph in the conclusion discussing the potential trade-offs between macroeconomic stability and social spending, let alone in countries with weak governance or limited capacity. Please see the highlighted part in the conclusion
Author Response File: Author Response.docx
Round 2
Reviewer 1 Report
Comments and Suggestions for AuthorsEfforts seem to have been made to implement the authors' recommendations. Although the study has improved compared to its previous version, I still believe that the standards of the study could be further enhanced. Nevertheless, I recommend the acceptance of the study.