KEYNOTE - Pezon - Trends in financing sustainability

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KEYNOTE - Pezon - Trends in financing sustainability

  1. 1. Financing sustainable water services trends and challenges Dr Christelle Pezon, IRC International Symposium on Rural Water Services Kampala, Uganda – April 13-15, 2010
  2. 2. Content <ul><ul><li>Sources and trends </li></ul></ul><ul><ul><li>Financing what ? </li></ul></ul><ul><ul><li>Challenges </li></ul></ul>
  3. 3. Sources: the 3Ts <ul><li>International Development Aid – Transfer </li></ul><ul><li>Final users – Tariffs </li></ul><ul><li>In country subsidies – Tax </li></ul>
  4. 4. <ul><li>TRANSFER </li></ul><ul><li>TAX </li></ul><ul><li>TARIFF </li></ul>Sources and flows <ul><li>INTERNATIONAL </li></ul><ul><ul><li>multilateral agencies </li></ul></ul><ul><ul><li>bilateral agencies </li></ul></ul><ul><ul><li>private foundations </li></ul></ul><ul><ul><li>oversees water authorities </li></ul></ul><ul><ul><li>migrants living abroad </li></ul></ul><ul><li>NATIONAL </li></ul><ul><ul><li>State and/or sector budget </li></ul></ul><ul><li>LOCAL </li></ul><ul><ul><li>final users </li></ul></ul>National Intermediate Water Authority Water Service provider Users
  5. 5. Development Agencies, INGO & Foundation <ul><li>$7.4 billion in the WASH sector (12 th position) </li></ul><ul><li>63% in water ($4.7 billion) vs needs ~ $70 billion </li></ul>Migrants funding <ul><li>4 times the international aid </li></ul>Oversees Water Authorities <ul><li>~ 15 millions euros (2009) </li></ul>National budgets <ul><li>From 0 to 85% of the sector budget (0.48% of GDP in average) </li></ul>Users <ul><li>From 0 to 100% of the service received </li></ul>
  6. 6. Trends in drinking-water and sanitation aid commitments by recipient income category, 1998 - 2008 <ul><li>Source: adapted from UN-Water GLASS Report (WHO, in press) </li></ul>
  7. 7. 1. Trends in drinking-water and sanitation aid commitments by recipient income category, 1998 - 2008 <ul><li>Source: adapted from UN-Water GLASS Report (WHO, in press) </li></ul><ul><ul><li>Aid to low-income countries (least and other low) has increased from 32% to 46% of total WASH ODA in 10 y. </li></ul></ul><ul><ul><li>Africa received 33% of ODA over 2002-2007 (OECD) </li></ul></ul>
  8. 8. Trends in aid (Development Agencies) for water and sanitation, education, and health,1995-2008 <ul><li>Source: adapted from UN-Water GLASS Report (WHO, in press) </li></ul>$11.5 b
  9. 9. Trends in aid (Development Agencies) for water and sanitation, education, and health,1995-2008 <ul><li>Source: adapted from UN-Water GLASS Report (WHO, in press) </li></ul>$11.5 b
  10. 10. Trends in funding mechanisms: the relative decrease of general budget support 1981-2008 <ul><li>Source: adapted from UN-Water GLASS Report (WHO, in press) </li></ul>
  11. 11. Trends in funding mechanisms: the relative decrease of general budget support 1981-2008 <ul><li>Source: adapted from UN-Water GLASS Report (WHO, in press) </li></ul>
  12. 12. Trends in funding mechanisms: the predominance of project and programme supports <ul><li>Source: EUWI Africa Working Group, 2008 </li></ul>
  13. 13. Trends in funding mechanisms: the predominance of project and programme supports <ul><li>Source: EUWI Africa Working Group, 2008 </li></ul><ul><ul><li>Only 29% of European aid to the sector in Africa is provided through sector budget support </li></ul></ul><ul><ul><li>According to the GLASS report, 12% of the grants and 2% of the loans are channelled through sector budget support </li></ul></ul>
  14. 14. Financing what? CapEx Opex CapManEx ExpDS ExpIS Cost of Capital New service X X X X X Existing service X X X X X Upgraded service X X X X X
  15. 15. Breakdown of development aid among project objectives, 2008 Source: adapted from UN-Water GLASS Report (WHO, in press)
  16. 16. Breakdown of development aid among project objectives, 2008 Source: adapted from UN-Water GLASS Report (WHO, in press) <ul><ul><li>87% of aid of 8 development agencies are disbursed for new services or for upgrading existing services </li></ul></ul>
  17. 17. 2. Breakdown of aid commitments to water and sanitation among purpose types, 2008 Source: adapted from UN-Water GLASS Report (WHO, in press)
  18. 18. 2. Breakdown of aid commitments to water and sanitation among purpose types, 2008 Source: adapted from UN-Water GLASS Report (WHO, in press)
  19. 19. 2. Trends in aid for basic sanitation and water 2003-2008 <ul><li>Source: adapted from UN-Water GLASS Report (WHO, in press) </li></ul>
  20. 20. 2. Trends in aid for basic sanitation and water 2003-2008 <ul><li>Source: adapted from UN-Water GLASS Report (WHO, in press) </li></ul><ul><ul><li>Aid for basic water and sanitation has declined from 27% to 16% of total aid since 2003 </li></ul></ul>
  21. 21. Breakdown of estimated needs to meet the MDG 7 target, 2008 Source: adapted from UN-Water GLASS Report (WHO, in press)
  22. 22. Breakdown of estimated needs to meet the MDG 7 target, 2008 Source: adapted from UN-Water GLASS Report (WHO, in press) <ul><ul><li>88% of the estimated need for WATER consist of recurrent capital and maintenance for existing services (vs 12% for new water coverage) </li></ul></ul>
  23. 23. Financing what? Transfer Tax Tariff CapEx Opex CapManEx ExpDS ExpIS Cost of Capital New service X X X X X Existing service X X X X X Upgraded service X X X X X
  24. 24. Challenges for rural services <ul><li>Thirsting for subsidies </li></ul><ul><ul><li>Over 2002-2007, subsidies represented 62% of ODA to LDCs </li></ul></ul><ul><ul><li>The financial crisis is reducing the level of subsidies </li></ul></ul><ul><li>Thirsting for efficiency (doing more with less) </li></ul><ul><ul><li>Scale to operate and support services (economies of scale) </li></ul></ul><ul><ul><li>Professional management </li></ul></ul><ul><ul><li>Improve in-country funds transfer to lower levels </li></ul></ul><ul><ul><li>Combine financing mechanisms </li></ul></ul><ul><li>Thirsting for sustainability </li></ul><ul><ul><li>Keep the services running, extend and upgrade them </li></ul></ul><ul><ul><li>Consistent share of costs between stakeholders </li></ul></ul>
  25. 25. Challenges for rural services <ul><li>New sources? </li></ul><ul><ul><li>development of decentralised cooperation and water operator partnerships </li></ul></ul><ul><ul><li>in-country tax, cross-subsidies from urban users (AVT) or from other sectors </li></ul></ul><ul><ul><li>tariffs? No historical record of rural water supply development based on tariffs exceeding operating costs </li></ul></ul><ul><li>Financing flows and regulatory mechanisms: possible framework... </li></ul>
  26. 26. Schematic example of a framework for a budget sector support Transfer Tariff Tax State Water Authority Water Service Provider OpEx ? CapEx CapManEx ExpDS ExpIDS
  27. 27. To conclude <ul><li>The world goes urban, so does the ODA </li></ul><ul><li>Our knowledge on sources, flows and costs must improve </li></ul><ul><li>More attention should be paid to maintenance and rehabilitation </li></ul><ul><li>Rural users cannot be charged full cost </li></ul><ul><li>Public finance options need to be better explored </li></ul>

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