Environment in emerging and transition economies

Improving Feasible and Extending Financing Strategy Methodology beyond Water Supply and Sanitation to Issues of Water Resources Management

 

Financing Strategy Methodology and FEASIBLE model

 

A strategic financial planning methodology for water supply and sanitation  developed jointly by the OECD/EAP Task Force and the Government of Denmark is designed to help countries improve their financial planning for the water supply and sanitation sector. Financing strategies provide the necessary link between the general programmes on the one hand, and project pipelines and public budgets on the other.


The Financing Strategy toolkit includes a methodology for elaborating such strategies, a computer-based model (called FEASIBLE©) and a User Guide manual for the model (for more information visit www.oecd.org/env/finance).


The FEASIBLE model (developed by a Danish consultancy COWI AS) helps to identify relevant policy packages, to reach these infrastructure targets for water supply and sanitation, as well as for municipal waste management (there are separate modules for each subsector) . It simulates in quantitative terms the consequences of different policy choices and in particular it assesses the investment, maintenance and operational expenditure that would be required to reach specific targets determined by local policy makers. These expenditure needs are subsequently compared with forecasted levels and sources of finance and the model calculates the resultant “financing gap” while the model allows simulating various policy packages to (gradually) bridge the gap.


These applications are more than technical exercises: by engaging all the major stakeholders in respective National Policy Dialogue on Financing WSS, they support constructive dialogue and agreements that facilitate effective programme implementation, improvement of service quality and the achievement of environmental goals. If properly developed financing strategies can help to generate additional financial flows from water users, public budgets, donors, IFIs, and the private sector. In some cases, the results of such work have been incorporated into medium term expenditure frameworks in Ministries of Finance, and they could provide a useful input into Poverty Reduction Strategy Programmes.


This toolkit has been successfully used in the past to assist several EECCA governments with their financial planning (e.g., Moldova, Kazakhstan, Armenia, Georgia, Ukraine, and several regions in the Russian Federation). Recent exercises in Armenia, Georgia, Kyrgyzstan and Moldova  have been carried-out in the framework of the EU Water Initiative’s work in EECCA, with strong support from the EC and EU Member States.