Achieving financial sustainability and recovering costs in bank financed water supply and sanitation and irrigation projects
This note is a partial response to the above mentioned 2010 Independent Evaluation Group (IEG) evaluation. It covers the specific issues to be addressed in the Water supply and Sanitation (WSS) sector and in the irrigation sector in two distinct parts, because if WSS and irrigation have some common features, there are many distinctions to be made. Among the various water-using sectors, that include navigation, fisheries, hydropower, rain fed agriculture, irrigated agriculture, WSS, and more generally 'the environment', cost recovery issues are of primary concern, and are the focus for this note, in the WSS and irrigation sectors. This preliminary background Note is divided in four parts: a 'history' of the call for financial sustainability and cost recovery and the parallel documenting of the lack of progress. This section ends with what this Note hopes to achieve in the face of what is clearly a deeply rooted problem; an outline of options to be considered for achieving financial sustainability of WSS service providers and recovering the costs of the WSS service through tariffs, i.e., from users and through subsidies; a discussion on what makes financial sustainability of irrigation projects different from WSS projects; and a summary of recommendations to teams involved in the identification, preparation, appraisal and supervision of water projects and of practical measures and actions that both the water sector board and the water anchor could take to help improve the Bank's track record in achieving and financial sustainability of the water projects it finances.
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