11303 Demographic Transition and EducationExpenditure in South Asia Opportunities and Challenges Mariana MarchionniNamrata Raman TognattaEmmanuel VazquezMonica Yanez-Pagans Education Global DepartmentFebruary 2026 A verified reproducibility package for this paper isavailable athttp://reproducibility.worldbank.org,clickherefor direct access. Policy Research Working Paper11303 Abstract Decline in the school-age population due to demographicchanges presents an opportunity to redirect resources withinthe education sector to improve access and quality. How-ever, the experiences of countries that have gone throughsimilar demographic transitions show that a shrinking stu-dent population does not automatically translate into moreefficient spending due to structural and political challenges.Realizing the potential fiscal space depends critically onhow education systems adapt in practice to demographicchanges. This paper projects public education expenditureas a percentage of gross domestic product from 2020 to 2050 across eight South Asian countries, considering demo-graphic shifts and different scenarios related to educationsystem coverage, efficiency, and economic growth. Thefindings show that demographic changes could allow forreinvesting educational resources for basic education equiv-alent to 0.6 percentage points of gross domestic producton average by 2050 (compared to 2020), even after achiev-ing universal basic education. Although the reinvestmentpotential for pre-primary and tertiary education is smaller,it remains significant at an estimated 0.14 percentage pointsof gross domestic product on average. The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about developmentissues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry thenames of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely thoseof the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank andits affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. Demographic Transition and EducationExpenditure in South Asia:Opportunities and Challenges* Namrata Raman Tognatta***Monica Yanez-Pagans*** Mariana Marchionni**Emmanuel Vazquez**** Keywords: education, demographic transition, demographic dividend, South Asia, educationresources. JEL codes: I22, I25, J11. 1.Introduction The demographic transition in South Asia presents both challenges andopportunitiesfor the education sector.By 2050,the region’s under-17population is expected to decline by about 10%, dropping from 634 million in2020 to 572 million. However, this trend will not be uniform across countries.While Afghanistan and Pakistan will see their school-age populations grow,others—includingBangladesh,Bhutan,India,Maldives,Nepal,and SriLanka—will experience significant declines. SAR is one of the most populated regions in the world and home to thehighest share of the global poor. Over the past decade, SAR has witnessed asignificant expansion in access to basic education. The implementation ofmeasures aimed at fostering enrollment and retention, reducing dropoutrates, facilitating grade-level transitions, and improving infant survival rateshas led to primary school attendance rates exceeding 90% in most countries,with secondary school attendance rates also on the rise (Béteille et al., 2020).1 Despite improvements in access to education, ensuring children receivequality education remains a significant challenge in SAR. For instance, theWorldBank’s Learning Poverty Database shows that in countries likeBangladesh and India, over half of the children at the end of primary schoolare in a state of learning poverty, meaning they fail to meet minimum readingproficiency levels. This percentage is even higher in Pakistan (77%) andAfghanistan (93%). One of the primary contributors to the persistently low quality ofeducation in SAR is the region's low investment in education. SAR countriesspendon average only 3.5%of their gross domestic product(GDP)oneducation. In contrast, the Education 2030 Framework for Action (UNESCO,2015) recommends that countries allocate a minimum of 4% to 6% of theirGDP to education. This investment level is significantly lower than that ofcountries with similar income levels and a comparable share of the school-agepopulation (Béteille et al., 2020). However, the challenge in South Asia is not just the low level ofinvestment in education, but also how inefficiently these funds are allocated.Recentdata on public education spending reveal a clear bias toward expenditure on physical infrastructure and staff salaries. This spendingpattern leaves limited room for investments in other critical areas that couldh