Sector Financing WASH

Sector Financing South Asian Conference on Sanitation 2018, Pakistan
Introduction

Water and sanitation sector financing strategies are a key component of sector policy and planning that enables sector stakeholders (policy makers, service providers, private sector and civil society) to make better investment decisions and to plan for financing of operations and maintenance. Effective and equitable development of WASH services requires financing strategies that incorporate financial data on all 3Ts (taxes, tariffs and transfers) and include estimates for non-tariff household WASH expenditure. Building these strategies relies on the transparency and predictability of sector financing and a prerequisite is that there is transparent recording of fund flows from taxes, transfers and tariffs in: a) Financing agreements between development partners and governments; b) Government budgets (national, state and local) showing both budgeted and actual funding flows, including those from development partners; c) Service providers’ financial statements, preferably in a format that is in accordance with International Financial Reporting Standards; d) Household consumption surveys that can clearly separate, out of the pocket expenditure on WASH. Even more specifically, financing agreements between governments and their development partners are essential in ensuring information on external transfers is accessible to legislators and the public. Furthermore, the financial assistance from development partners should contribute in national vision/targets. National budget systems support effective decision-making by local, provincial and national governments and development partners, and shed light on the capacity to absorb available financial resources. Financial statements provide an overview of capital depreciation or formation, profit and loss and cash flows of service providers. In contrast, the lack of systems within the water and sanitation sector for gathering financial data, assessing it and making it accessible is a critical impediment in generating a picture of who is financing what, with what funding, for how long and with what effect. Despite serious commitments of governments to support access to water, sanitation and hygiene services and facilities, 40% population of South Asian Countries doesn’t have access to improved sanitation and 12% doesn’t access to improved water . This alarming situation resulted in deaths of 126,680 children under 5 due to diarrhoea during 2012 . Afghanistan stands on least coverage to improved sanitation with only 32%, followed by India 40% and Nepal 46%. Likewise, in improved water coverage Afghanistan has least percentage of 55% followed by Bangladesh 87% and Pakistan 91%. Maldives has quit better position in WASH services with 98% improved sanitation coverage, 99% improved water coverage and only one diarrhoeal death of under 5 children. (for details see table 1 below).

Global Analysis and Assessment of Sanitation and Drinking Water (GLAAS) reports shows a substantial increment of about 50% in WASH expenditures of the region during the last five years. Notably, Afghanistan has reached to almost five times larger volume of expenditures in 2015 as compared with 2012 expenditures. Similarly, Bangladesh, Pakistan and India have spent almost double amounts in 2015/16 as compared with their expenditures during previous years. Furthermore, Sri Lanka, Bhutan and Nepal have also incremented in their WASH budget. The expenditures of Maldives have not reported in any of the reference GLAAS report. (for details see table 2).

On the other side, an alarming analysis shows a strong relation in WASH investment and Diarrhoeal death burden in Under 5 children. This analysis has been derived from calculating per capita expenditures on WASH (as of total expenditures and population reported in GLAAS 2016/17) and UNICEF 2015 data on diarrhoeal deaths in under 5 children . Sri Lanka has the least diarrheal deaths of under five (2%) with the highest WASH per capita spending of US$ 14, and similarly Bhutan has diarrhoeal deaths (6%) with WASH per capita spending of US$ 16. India with least WASH per capita spending of US$ 4 has second highest percentage of diarrhoeal deaths (10%) and Afghanistan with WASH per capita spending of US$ 5 has the highest diarrhoeal deaths (12%) in region. (For details see figure I). Diarrhoeal deaths of under 5 children is 2% in Maldives but its expenditures on WASH are not available for analysis.

Another calculation on the basis of WASH specific budget in GLAAS 2016/17 and world bank’s country wise GDP shows that despite of severe implications of WASH related issues, regional countries are allocating a very minor portion of GDP for WASH sector. The highest percentage of only 1.9% GDP has allocated for WASH in Nepal, followed by 0.7% Bhutan, 0.5% Bangladesh. India, Pakistan and Sri Lanka stand on 0.2% of their GDP. However, Water and Sanitation Programme (WSP) reports on inadequate sanitation costs for India, Bangladesh and Pakistan (2010, 2011 and 2012 respectively) reported economic losses of 6.4% of GDP in India, 6.3% of GDP in Bangladesh and 3.9% of GDP in Pakistan due to inadequate sanitation facilities. Furthermore, WSP is predicting an economic loss of US$ 65 billion annually due to lack of access to sanitation .


Financial Transparency & Sustainability

As per GLAAS report 2017, only Bhutan among South Asian countries publicize all expenditure reported for government, Official Development Assistance (ODA) and Non-ODA expenses. All other South Asian countries reported for limited publication of WASH related expenditures. Furthermore, none of the South Asian countries reported to cover 50% cost of their urban sanitation’s operations and maintenance through tariff collection. In urban drinking water supply, Bangladesh and Nepal cover more than 80% of O&M cost through collected tariffs while India and Maldives cover 50% to 80% cost. In rural drinking water supply Nepal collects more than 80% cost of O&M through tariffs while Maldives stands between 50% to 80%. Regarding national targets for urban sanitation, only Afghanistan, Bhutan and India consider their current financing sufficient to meet target between 50% to 75% while all other South Asian countries have financing to achieve less than 50% targets. In rural sanitation context, India and Nepal reported sufficient financing to achieve more than 75% of national targets while Afghanistan to achieve targets between 50% to 75%. For national target of urban drinking water supply, Afghanistan, Bangladesh, Bhutan and Nepal reported sufficient financing to meet 50% to 75% targets. However, only Bhutan reported sufficient financing to achieve more than 75% of national targets for rural drinking water supply while Afghanistan, Bangladesh and Nepal estimated their financing sufficient to meet 50% to 75% of targets.

The overall regional and country specific information indicated that financial reporting is often insufficient to make sound and evidence-based planning and budgeting decisions. This is coupled with inappropriate prioritization of project mainly driven by the political agendas and donor priorities that are mainly guided by top down approaches. In absence of comprehensive financial planning, it is difficult to ascertain a sound baseline of WASH sector. Further, these datasets are rarely linked with poverty and equitable distribution of resources, hence it is very difficult to know that how much has been spent specifically to meet the needs of poor groups and scale of problems being confronted different groups. A lack of timely allocation of adequate resources for installation and O&M of WASH infrastructure further hinders progress, and this is generally due to absence of clear financial guidelines and systems for WASH. The poor supervision and a lack of funds and insufficient tariff collection to maintain WASH facilities cause them to deteriorate and break down, at times permanently. Lastly, the WASH expenditures are not comprehensive as these generally miss the contributions of private sector, cost recovery and households out of pocket expenditures though these can be documented though effective household surveys and appropriate financial management /planning systems. The off-budgetary support, mainly for technical and pilot purposes, is generally not included in overall investment and expenditures records of the Government.
1. How Sector Financing is defined in WASH? What is meant by Direct Transfers, Tariffs, and Cost recovery?
2. Criteria for sector financing, how priorities are set? How donor and partner financing can be reflected in government system? What are the trends of last five years and how sectoral financing is monitored? How do we plan for short term and long term planning for sector? How we can save economic losses by investing more in sector?
3. What are the quality parameters in WASH Financing: budgeting allocations verses spending? If spending is low how to track and flag? What are the key inequities in financing? What are the criteria of allocation and how it is prioritised? Is it driven by political agenda, evidence based planning etc.? How civil society monitors inequities in financing? Are there any budget reports verses allocations like other sectors are doing e.g. education, health, child rights, etc.
4. What is private sector contribution? Are there any successful models, success stories best practices or lesson learned? How we can promote sustainable financing strategy, one that will increase resource allocations to the sector, improve the efficiency and effectiveness of existing resources wherever they are found, and tap the potential of alternative financing mechanisms?
5. How to bridge gaps and imbalances in existing fund allocations to water, sanitation and hygiene programme areas and the estimated need for additional resources? What are the best practices to ensure participation of poor communities and civil society organizations in decision-making over priority spending in water and sanitation?
6. Use of WASH expenditures review for accountability and better planning? How can we build key partners trust and capacity on budget analysis, tracking & advocacy to engage with relevant service providers?