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Finance

A large financing gap has been identified as one of the greatest barriers to achieving the water, sanitation and hygiene-related targets of the SDGs.

Money is needed not only for the construction of water, sanitation and waste infrastructure but also for the people and the institutions that maintain and expand services to a growing population.

The World Bank has estimated that to meet Targets 6.1 and 6.2 alone, capital financing would need to triple to US$ 114 billion per annum and operating and maintenance costs need to be considered in addition. Maintaining existing assets would require 1.5 times the amount needed for construction of infrastructure.

There are large variations in financing needs from region to region and country to country, hence financing strategies are needed based on evidence and realistic proposals for how to fill the gaps. There are ultimately only four main sources of finance (Figure 1).

 

Graphic 2

Figure 1: Potential sources of financing for the SDGS

Source: Djeneba Doumbia and Morten Lykke Lauridsen, 2019, Closing the SDG Financing Gap—Trends and Data.

 

Attracting more finance, and ensure better use of existing financial sources is highly depended on foundational issues. These need to be urgently addressed if countries are to meet their SDG promises (Figure 2).

 

Graphic 1

Figure 2: Foundational issues to mobilise finance for WASH

Source: Leslie Pories, Catarina Fonseca, and Victoria Delmon, 2019. Mobilising Finance for WASH: getting the foundation right.

 

SWA role

There are several ways in which the SWA partnership is making the business case for investing in water, sanitation and hygiene and advocating for more efficient use of existing funding.

We co-organise the SWA Finance Ministers’ Meeting, which regularly gather ministers of finance from around the world to discuss the political and institutional reforms required to achieve SDG6.

SWA partners also develop tools and materials to support collection of evidence and advocacy around funding of water, sanitation and hygiene. For example, the WASH SDG Costing Tool, an Excel-based cost model to estimate the costs of achieving the SDG6.1 and 6.2 targets, is being used in 140 countries. The Collection of Resources on WASH Financing, a collection of resources around planning, implementation and review of progress on SDG financing. The SWA Tools Portal has several tools specifically around financing.

To meet Targets 6.1 and 6.2, capital financing would need to triple to US$ 114 billion per annum and operating and maintenance costs need to be considered in addition.

Most countries and territories lack a system for collecting comprehensive WASH budget data.

While over 75% of countries reported the existence of financing plans for WASH, more than half of these plans are insufficiently implemented.

Many countries have measures to reach populations living in vulnerable situations in policies and plans, but far fewer have corresponding systems for monitoring or financing.

An average of 56% of subsidies reach the wealthiest quintile of a country population while only 6% reach the poorest quintile.

Aid commitments for water and sanitation to Sub-Saharan Africa increased from US$ 1.7 billion to US$ 3.0 billion from 2015 to 2017.

Financing was identified as a main challenge by half of the countries which submitted briefs ahead of the Sector Ministers Meeting in 2019: 21 out of 42 countries.

A lack of sufficient resources to meet sanitation targets is reported in all SDG regions. Quantitative data from 20 countries and territories reveal a WASH funding gap of 61% between identified needs and available financing for WASH.

For sanitation, the gap between richest and poorest has been reduced in 52 countries, it has increased in 22 countries . For water, the gap between richest and poorest has been reduced in 35 countries while increasing in 39 countries.

Global subsidies level for water and sanitation at the moment are estimated to be between 1.59% - 1.95% of GDP of low- and middle-income countries.

After declining slightly in 2017, aid disbursements for water and sanitation are expected to exceed 2017 levels during the next one to two years, reflecting recent increases in aid commitments. Disbursements have levelled off.

Strengthening country systems or systems approaches was rated as one of the highest priority activities in WASH among ESAs and was a major theme in several ESA water/WASH strategies.

Documents

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Key documents Type
Easy-to-use guidelines on the SDG WASH Costing Tool
Regina Rossmann

Governments should redesign WASH subsidies to benefit those who need them the most, rather than those who can afford to pay themselves.

Regina recommended reading: Mobilizing additional funds for pro-poor water services: An exploration of potential models to finance safe water access in support of SDG 6.1.

Policy Advisor at Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ)
Claire Lyons

Most often, I think too few stakeholders have any real idea how to bridge the gap from seeing the water supply and sanitation sector as a technology problem to be solved; to understanding and then applying existing financial approaches and structures as a core component of achieving SDG6 – we need to look at the energy sector lessons for how to leap frog this chasm.

Senior Manager and Practice Lead, Sector Engagement | Water.org
Gustavo Saltiel

It is evident that to access the levels of finance required, the policy, institutional and regulatory enabling environment must be conducive. Although the increase of capital inflows is a necessary condition, it is insufficient. Increased coverage of sustainable water supply and sanitation services will require financial and institutional strengthening measures in tandem to ensure that capital investments translate in to effective, efficient and sustainable services.

Gustavo recommends the publication: Reform and Finance for the Urban Water Supply and Sanitation Sector.

Global Lead for Water Supply and Sanitation, Water Global Practice, The World Bank
Dr Fiona Gore

The World Health Organisation works on finance in the WASH sector because without adequate, well allocated finance, billions of people will continue to lack access to safe drinking-water and adequate sanitation. Access to water and sanitation could ultimately save over 800 000 lives per year, many of which are children, and improve the lives of many more. There are great opportunities to improve and increase WASH finance data, leading to more informed decision-making.

Fiona recommends the GLAAS report and specifically the use of the TrackFin methodology to understand expenditure in the sector at country level.

Team Leader WHO-led UN-Water Global Analysis and Assessment of Sanitation and Drinking-Water (GLAAS), WHO
Pim van der Male

The sense of urgency in covering the existing financing gap for WASH seems to be absent in the sector. We need to move from talking about finance to actually implementing innovations in this area. We need more focus on local currency financing. Hard currency financing results in a lack of sustainable management and public accountability. Hard currency and sovereign guarantee loans disconnect the risks and associated costs from the repayment of the loan through the water tariffs and revenues. And sovereign guarantee loans disconnect the asset creation by the national government from the operations and maintenance by the service providers.

Pim recommends the report: The real costs of hard currency loans by the REBEL group 2019.

hematic Expert Water at Ministry of Foreign Affairs Ministry of Foreign Affairs of the Netherlands
Jeffrey D. Goldberg

Sound governance is essential to mobilize finance for the water and sanitation sector. When countries have effective policies, country-led processes, and institutions capable of delivering sustainable water and sanitation services transparently, they attract investment from both domestic and external sources. That's why USAID is committed to working on water and sanitation sector governance and finance under the U.S. Global Water Strategy.

Jeff recommends the WASH-FIN’s approach to closing financing gaps.

Director, Water Office, U.S. Agency for International Development