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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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Guidelines for performance-based contracts

In many developing and transition countries, the performance of water utilities is poor and many countries have therefore turned to performance contracting. The OECD has developed Guide lines in which the key elements for preparing, negotiating and implementing performance-based contracts are addressed. They include the choice of performance indicators, tariff structures and mechanisms for monitoring and enforcing the contract. This tool was developed primarily for countries in Eastern Europe, Caucasus and Central Asia (EECCA) but could potentially be applicable in other regions.

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