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Financing Water Supply and Sanitation Investments : Utilizing Risk Mitigation Instruments to Bridge the Financing Gap

By Baietti, Aldo

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Book Id: WPLBN0000206565
Format Type: PDF eBook
File Size: 0.8 MB
Reproduction Date: 2005
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Title: Financing Water Supply and Sanitation Investments : Utilizing Risk Mitigation Instruments to Bridge the Financing Gap  
Author: Baietti, Aldo
Language: English
Subject: Economics, Finance & business, World Bank.
Collections: Economics Publications Collection
Publication Date:
Publisher: The World Bank


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Baietti, A. (n.d.). Financing Water Supply and Sanitation Investments : Utilizing Risk Mitigation Instruments to Bridge the Financing Gap. Retrieved from


SUMMARY: Water supply is essential for growth, as well as for social well-being. It is probably the most difficult of all infrastructure services to substitute, and its absence or deficiency represents a particular burden on the poor. In the developing world, 2 out of every 10 people lack access to a safe water supply, and 5 out of 10 have inadequate sanitation. This means that worldwide, more than 1.1 billion people do not have access to safe drinking water, and roughly 2.4 billion are without adequate sanitation. Yet even these estimates understate the extent of the access gap. Service is poor, even in many countries that have water supply systems. For many consumers, piped water is often intermittent, and, when available, it is unsafe for drinking. In addition, sanitation facilities are often inadequate, overloaded, in disrepair, or unused. To improve the situation, the World Summit on Sustainable Development in 2002 specified the targets of the Millennium Development Goals, which aim to reduce by half the proportion of people without sustainable access to safe drinking water and basic sanitation by 2015. Success in this would mean providing an additional 1.5 billion people with access to safe and reliable water and about 2 billion people with basic sanitation services. To achieve these goals, annual investments in water supply and sanitation in developing countries would likely need to double from the historical level of US$15 billion to US$30 billion per year. Maintaining even current investment levels, let alone doubling them, represents a daunting challenge in the face of constrained public resources and aid flows; however, involvement of the private sector has so far remained very limited. According to the World Bank?s Private Participation in Infrastructure (PPI) database, the water sector received only 5 percent of total private investment in infrastructure between 1990 and 2002. It has thus been a particularly difficult sector for attracting sorely needed private capital, operational skills, and management expertise. The main reason is that the water sector is subject to a number of specific risks, which do not affect the other infrastructure sectors?or affect them to a lesser degree. These risks include high capital intensity, political pressure on tariffs, a frequently held conviction of water as a ?free? good, deficient regulation, subsovereign risk and lack of subsovereigns? access to financing, poor condition and insufficient knowledge of networks and customer bases, and currency mismatch between revenues and financing sources.


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