Yesterday, I had the chance to participate to the high level finance panel at the 5th World Water Forum, explaining the crisis’ impact on the water sector.

The crisis actually affects all types of water and sanitation systems – whether they are located in developing countries or in developed countries -  in four primary ways:

  • Capital Improvements - Tightened liquidity and higher costs of borrowing forces them to postpone needed capital improvements.
  • Cash flow – Increasing (or even widely fluctuating) operating costs from energy, chemical and other variable costs create uncertain cash flow conditions.
  • Revenues - Customers either through loss of jobs or reduced disposable spending are less willing to pay their existing utility bills. Revenues from ındustrıal customers are also threatened as production declines in numerous water-dependent ındustries.
  •  Low-income assistance programs and social support agencies have less ability to aid those who truly cannot afford to pay for water.

This all places a severe stresses on water systems, even those that are reasonably sustainable in normal times. However, for troubled systems or those which need to raise their level of service to provide water and sanitation to large unserved segments of the population, this economic crisis can have a devastating effect.

What can be done to try to alleviate this problem?

One solution being tried by some countries, such as the US, is to direct sizeable economic stimulus money on water infrastructure projects. Funding this sector has been shown in past severe economic downturns to quickly create employment and provide long-term economic benefits. So for example, in President Obama’s Economic Stimulus Plan which was recently signed into law, over $10 Billion is dedicated to local water, sewer and to federal water projects. Many of the projects to be funded were already in the pipeline for building over the next several years and they will be able to quickly create what we call in the US “shovel-ready” jobs.
I think this is a sound approach, one which will help deal with both a short-term and mıd-term deficiencies in the water sector.

However, it is important to recognize that although these spending levels may seem sıgnıfıcant, they only represent a small part of the overall long-term financial need for water and sanitation infrastructures.
Therefore, coupled with this type of stimulus plan, there must the consistent implementation of a strong effort to reform the water sector and create a sustainable path with better governance, management, operation and environmental care. This is what ultimately will insure that greater long-term internally generated and external financing will flow to the water sector.