Meeting the Challenge of Financing Water and Sanitation

Tools and Approaches

image of Meeting the Challenge of Financing Water and Sanitation
The investments needed to deliver sustainable water and sanitation services, including the funds that are needed to operate and maintain the infrastructure, expand their coverage and upgrade service delivery to meet current social and environmental expectations, are huge. Yet, most systems are underfunded with dire consequences for water and sanitation users, especially the poorest. Providing sustainable drinking water supply and sanitation services requires sound financial basis and strategic financial planning to ensure that existing and future financial resources are commensurate with investment needs as well as the costs of operating and maintaining services. Some of the key messages of the report are:

- WSS generate substantial benefits for the economy

- Investment needs to generate these benefits are large in both OECD and developing countries

- Tariffs are a preferred funding source, but public budgets and ODA will have a role to play, too

- Markets-based repayable finance is needed to cover high up-front capital investment costs

- Strategic financial planning and other OECD tools can help Governments move forward

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Financial planning tool for water utilities

Few water utilities have the capacity to rely on strategic financial planning. The Financial Planning Tool for Water Utilities (FPTWU) was therefore created to assist water utilities, originally in EECCA countries, with achieving medium and long-term operational and financial sustainability through thorough investment planning. It is a computerised model that allows users to summarise key technical, financial, operational parameters of a water company, calculate a set of performance indicators for utility monitoring and analyse the financial gap to meet these performance indicators on the basis of cash in and cash out. The resulting gap is presented graphically and the model allows defining a program of measures in order to close the financing gap.

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