Investing in Human Capital for a Resilient Recovery : The Role of Public Finance

COVID-19 unleashed a global health emergency and an unprecedented economic crisis. Against the backdrop of the most severe global recession in decades, the crisis threatens to erase a decade of progress in hard won human capital gains.

Unless addressed with decisive investments, the scars of the COVID-19 shock on human capital and future productivity could become permanent.

Public finance has a critical role to play in restoring and building human capital, first as a response to the COVID crisis and second as a central element in a green, resilient, and inclusive recovery.

Partnerships are needed between staff and institutions working on human capital and public finance to ensure the adequacy and efficiency of human capital financing. This calls for a whole of government approach within countries and a renewed commitment to global partnerships.    

A new World Bank report: Investing in Human Capital for a Resilient Recovery: The Role of Public Finance highlights recent innovations and illustrates actionable steps for the short term as well as directions for the longer term, by country context, with the overarching objective of supporting a resilient recovery.

Findings

• Addressing the COVID crisis calls for ensuring the adequacy, efficiency, and sustainability of public spending on human capital, especially during fiscal tightening.
• Strengthening governance and service delivery is critical to ensuring value for money and an impact on human capital outcomes.
• Securing resources for human capital involves placing human capital outcomes at the center of the budget process and prioritizing expenditures that contribute to human capital accumulation and utilization.
• Fiscal space needs to be expanded. We are calling for not only raising domestic revenues, but also engaging in debt restructuring, debt relief and planning for future crisis.
• Protecting and investing in people is central to green, resilient, and inclusive development.
• A durable recovery hinges on restoring human capital, while improving services and systems through investments and innovation, even during periods of fiscal tightening.

Recommendations

Securing the necessary resources involves placing human capital outcomes at the center of the budget process and prioritizing spending that benefits people.

The immediate priorities are:

• Restoring health and strengthening health systems
• Protecting children from malnutrition and other harm
• Bringing students back to school and recovering learning losses, and
• Supporting job opportunities

Sustained recovery depends on improving systems to achieve:

• Universal health coverage
• Early childhood development
• Learning and skills development linked to job market needs
• Adaptive social protection, and
• Women’s economic empowerment

To do this, fiscal space needs to be expanded through raising domestic revenues and through debt restructuring and relief.

We must recommit to helping every person achieve their potential, through investing more in their human capital.