Overview of Experience with Water Financing Strategies: Environmental Financing Strategies for Water and Wastewater Sectors in EECCA countries

A regional overview and cross-country comparison of the first several years of experience with environmental financing strategies for water and wastewater sectors in EECCA countries can be found in the OECD/DANCEE publication Financing Strategies for Water and Environmental Infrastructure.

Some of the key conclusions emerging from the recent country experiences with developing water sector financing strategies can be summerised as follows:

1. The continuation of the current trends is not sustainable and may soon result in a collapse of essential water infrastructure services with serious social and health impacts. These unsustainable trends are characterised by a combination of ambitious targets for the level and quality of water and sanitation services and financing arrangements, which involve low user charges and limited access to funds for capital repairs (maintenance). This combination will result in a further deterioration of the level and quality of services.

2. User charges are the only feasible long-term source of finance for operational and maintenance expenditure. At the same time necessary increases in user charges must take full account of what people can afford. Existing subsidy schemes need to be replaced by targeted support for poor and vulnerable groups, as part of a strategy developed through a participatory process.

3. National and local budgets have an indispensable role in the short and medium term in financing rehabilitation and capital investments, in providing social protection and in facilitating access to credit. Scarce public funds and donor grants need to be concentrated on fewer projects to ensure that urgently needed rehabilitation is carried out, and that the deterioration of water networks is arrested. Preparation and implementation of financial arrangements should be conducted transparently in order to enhance efficiency and effectiveness.

4. International financial institutions (IFI) will continue to have an important demonstration and catalytic function facilitating financial, engineering and management discipline and paving the way for the ultimate reliance of capital improvements on debt financing.

5. The role of private finance will be constrained for several years, although different countries (or different regions within countries) vary in terms of borrowing capacity and access to financial and capital markets for long term finance. Public Private Participation in most cases is not a financing but a management solution.

Files to download:

• Feasible Financing Strategies for Environmentally-Related Infrastructure: OECD Policy Brief (English) 
• Financing Strategies for Water and Environmental Infrastructure (Russian)