Financing Water and Sanitation
A radical increase in water and sanitation investments is required to meet Sustainable Development Goal 6: to ensure availability and sustainable management of water and sanitation for all by 2030.
New sources of finance, and better use of existing sources, are a critical element of the enabling environment we urgently need to create if we are to meet our promises.
The issue explained
National WASH plans are underfunded. Most countries have WASH (water, sanitation and hygiene) policies supported by national plans. However, the vast majority of countries have insufficient financial resources to implement these plans. Official development assistance has increased modestly in recent years but by nowhere near enough.
WASH regulators are unable to carry out duties. In most countries, insufficient funds and human resources are often a major constraint in drinking-water and sanitation surveillance and oversight, which includes a failure to fully take corrective action against poor performance by service-providers.
Decision-making systems are underfunded. Most countries do not disaggregate budget or expenditure data for drinking-water and sanitation, suggesting that data systems are in need of investment. The majority of countries do not use performance indicators on expenditure and cost-effectiveness, potentially affecting decisions on WASH budget allocations or spending priorities.
Transboundary water cooperation is not attracting enough investment. Financial constraints and limited understanding among governments of the benefits of cooperation on water resources often hinder the mobilization of financial resources for transboundary water cooperation. The perceived high risk due to lack of formal arrangements is off-putting to investors in many cases.
There are three major sources of funds for water and sanitation.Taxes from individuals and businesses; transfers such as overseas aid, remittances or market interest rate lending; and tariffs paid by households, businesses and governments. The provision of good services depends on effective planning of how these funds are raised, in what proportions, and how they are implemented.
The way forward
WASH plans must be fully funded and well coordinated. Funding gaps impede progress, while existing funding from different sources is often uncoordinated among donors or sometimes even counterproductive. Improved targeting, better utilization of existing resources including harnessing of synergies between different SDGs, and the mobilization of public and private financing is required to catalyse efficient service delivery and implementation.
Governments must utilize innovative financing. Models for involving the private sector must be part of the funding mix, such as: public private partnerships, micro finance, green bonds and technology transfer.
The WASH sector must promote smart water and sanitation investments. Cash-strapped local governments, for example, should invest first in retro-fitting of existing systems while improving the collection of municipal taxes that in the longer term will generate a viable revenue stream to refinance loans and debt instruments for future investments in new, more expensive infrastructure.
Facts and Figures
- From 2015 to 2019, official development assistance (ODA) commitments to the water sector increased 9 per cent to US$ 11.4 billion, but disbursements showed little change. (UN-Water 2021)
- In 2016, the gap between official development assistance (ODA) funds committed and those disbursed for the water sector had narrowed to US$ 100 million. In 2019, this gap had grown to over US$ 2.6 billion, due in part to limited capacity to disburse or absorb aid funding. (UN-Water 2021)
- Official development assistance (ODA) disbursements specifically for drinking water and sanitation comprised 63 per cent of total water sector ODA in 2019 (US$ 6.0 billion). (UN-Water 2021)
- Less than 15% of countries report having sufficient financial resources to implement national WASH plans. (GLAAS 2019)