Financing the Millennium Development Goals for Water and Sanitation: What Will it Take?

Abstract

The key financing challenge in meeting the Millennium Development Goals (MDGs) is to arrive at consensus-based, viable and sustainable country-level financing strategies that are integrated into the overall national planning and expenditure process. This requires an assessment of various policy scenarios taking into account economic capacity (as defined by GDP) as well as (plausible) level of public expenditures and affordability at a household level. This paper is prepared to guide the discussions on the characteristics of financing requirements, affordability and feasibility of the MDGs on water and sanitation in Africa. It argues that for African countries to meet the targets, they will need to implement cost recovery policies (leverage more resources into the sector) and use public resources better so as to increase sector performance and help the poor gain access to water and sanitation.

Notes

 1 The paper draws on a presentation by Piers Cross, Regional Manager at Water and Sanitation Program-Africa (WSP-AF) made on behalf of the WSP-AF's finance team at the Berlin Forum. An earlier version of the paper was also circulated at the finance stream of the Global WASH Forum 2004 in Dakar, Senegal.

 2 These are estimates of first round requirements; more work is needed to especially understand sanitation costs, i.e. hygiene promotion, etc.

 3 Unit costs for operation and maintenance and for sector development are difficult to arrive at, given wide variations dependent upon a number of variables. These estimates assumed, conservatively, that the total costs of O&M and sector development were similar to the costs assumed in Joint Monitoring Program (2000), but applied these costs to both new and existing infrastructure, rather than new infrastructure alone.

 4 For Zambia, see Chiwele (2004); for Uganda, see Government of Uganda (2004); for Ethiopia, see DHV Consultants (2003).

 5 This tool (SWIFT—Sector-wide Investment and Financing Tool) aims to provide an easy computer-aided analysis for testing various policy scenarios in consultation with country sector institutions and different stakeholders.

 6 A word of caution is necessary. These are best-judgement estimates given the difficulty in assessing off-budget resources (NGO expenditure) and at times even public spending in the sector. The studies did not manage to capture self-financing at household level. This is even truer for sanitation given the fragmented nature of public finance and the significant degree of self-supply.

 7 See the sources for Table 2.

 8 This analysis uses the average spending figures for Sub-Saharan Africa for illustrative purposes, and is based on data for only 12 countries. The sources for Ethiopia and Kenya are WSP-AF (2004a, b), respectively.

 9 NGO resources are significant as shown in the Kenya and Ethiopia finance studies where the off-budget resources amounted to about 20% of total sector expenditure.

10 See Brocklehurst (2004) as an illustration.

11 For several examples and a discussion of the issues in the use of such subsidies, see Mehta (2003).

12 For a discussion of the use of access subsidies in demand-responsive approaches in rural water supply, see Mehta (2003).

13 Based on Mehta (2003).

14 This section is based on SWIFT currently developed by WSP-AF to help national or sub-national sector planning bodies developing financing strategies for the water sector by analysis financial gaps arising from different policy scenarios.