A nation’s water sector comprises a range of functions and services. The starting point in constructing a financing strategy is to consider, for each part of the sector, its sources and modalities of finance, the financial status of the entities involved, and their estimated future financial requirements.
Some instruments can perform both economic and financial purposes: 1. economic instruments influence the behaviour of users and hence the allocation of the resource. 2. financial instruments generate financial revenues for the operation and development of the sector.
However, the two effects may overlap, and the same instrument may perform one or both purposes in different circumstances.
National or local government grants or other support
External grants (oda)
Commercial loans and equity
Instruments for financing the water sector (1)
i) Charges for the use of water and water services:
-Water abstraction charge
-Water tariffs for households, industries, farmers & other major users
-Sewerage & effluent charge
-Water pollution charges and taxes
-Licence fees & charges for use of specific services
-Flood protection levies
Instruments for financing the water sector (2)
ii) National government grants, soft loans & guarantees, from National, state or municipal budgets and/or financial intermediaries & development banks.
iii) External grants & concessional loans (oda)
iv) Philanthropic agencies & partnerships
v) Commercial loans, equity & PSP, for example, IFI loans, Commercial bank loans & microfinance, Bonds, Private equity, External guarantees & risk sharing, PSP contracts of various kinds (BOTs, concessions, etc).
Case: example of coherent financing in France Payment by users subsidy Basin agency Polluter’s tax Local authority (municipality or syndicate) Cost refund At the country level water pays for water only , Water users