Demographic Transition and Education Expenditure in South Asia : Opportunities and Challenges

Decline in the school-age population due to demographic changes presents an opportunity to redirect resources within the education sector to improve access and quality. However, the experiences of countries that have gone through similar demographic transitions show that a shrinking student population does not automatically translate into more efficient spending due to structural and political challenges. Realizing the potential fiscal space depends critically on how education systems adapt in practice to demographic changes. This paper projects public education expenditure as a percentage of gross domestic product from 2020 to 2050 across eight South Asian countries, considering demographic shifts and different scenarios related to education system coverage, efficiency, and economic growth. The findings show that demographic changes could allow for reinvesting educational resources for basic education equivalent to 0.6 percentage points of gross domestic product on average by 2050 (compared to 2020), even after achieving universal basic education. Although the reinvestment potential for pre-primary and tertiary education is smaller, it remains significant at an estimated 0.14 percentage points of gross domestic product on average.