ISSUES IN MANAGING WATER CHALLENGES AND POLICY

June, 2015
INSTRUMENTS: REGIONAL PERSPECTIVES AND CASE
STUDIES

Prepared by an IMF Staff Team

CONTENTS

REGIONAL PERSPECTIVES ________________________________________________________________________ 2 

A. Key Water Issues in Sub-Saharan Africa _________________________________________________________ 2 
B. Key Water Issues in Middle-Eastern and Central Asian Countries _______________________________ 4 

CASE STUDIES _____________________________________________________________________________________ 6 

C. BURKINA FASO __________________________________________________________________________________ 6 
D. DEMOCRATIC REPUBLIC OF THE CONGO _____________________________________________________ 10 
E. PAKISTAN______________________________________________________________________________________ 12 
F. SINGAPORE ____________________________________________________________________________________ 15 
G. YEMEN ________________________________________________________________________________________ 17 

FIGURES
1. Annual Renewable Freshwater Resources per Capita ____________________________________________ 2 
2. Annual Freshwater Withdrawals per Capita______________________________________________________ 3 
3. Burkina Faso: Total Renewable Water Resources ________________________________________________ 6 
4. Burkina Faso: Actuals and Projections of Per Capita Supply and Use, 2000–2030 _______________ 7 
5. Burkina Faso: Real Growth and Rainfall __________________________________________________________ 8 
6. Burkina Faso: Access to Water and Sanitation ___________________________________________________ 9 
7. Pakistan: Water Availability ____________________________________________________________________ 13 
8. Yemen: Water Access and Population Growth _________________________________________________ 17 

TABLES
1. Burkina Faso: Selected Indicators ________________________________________________________________ 7 
2. Democratic Republic of the Congo: Selected Indicators _______________________________________ 10 

References _______________________________________________________________________________________ 21 

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REGIONAL PERSPECTIVES
A. Key Water Issues in Sub-Saharan Africa1

1. Sub-Saharan African (SSA) countries are characterized by highly variable water

resources, with relatively low per capita supply on average. Countries in the western Sahel,
eastern horn, and
Figure 1. Annual Renewable Freshwater Resources per Capita
southern tip have scarce (m3/person/year)
access to watersheds and
highly variable rainfall Middle East and North Africa

(e.g., Burkina Faso, Kenya, South Asia

Niger, Zimbabwe), with
Sub Saharan Africa
relatively abundant
resources in the middle of East Asia and Pacific
the continent (Angola,
Europe and central Asia
Cameroon, Democratic
Republic of the Congo North America

(DRC), Republic of Congo). Latin America and Caribbean

On average, SSA countries
0 5000 10000 15000 20000 25000
have relatively limited
2
water resources compared Source: FAO, Aquastat.
to other regions of the world (Figure 1).

2. Despite low per capita supply of resources, “water stress” (as defined elsewhere in this
exercise) is tempered by low annual withdrawals, reflecting both low access rates and low
depth of access to water. On average, SSA countries withdraw the lowest annual volume per capita
of all regions (Figure 2) and display the lowest rate of access to drinking water (64.5 percent), except
for Oceania (55.2 percent).3 Chief among the reasons for this low access is a deficit of infrastructure
(including energy), reflecting insufficient, outdated, or poorly maintained water storage, distribution,
and treatment facilities. The annual infrastructure investment gap in Africa’s water sector is
estimated to be $22 billion (Foster and Briceño-Garmendia 2010). The infrastructure deficit is
magnified by poor management, including through poor maintenance, waste, below-cost-recovery
tariffs, and low collection rates. Ironically, such problems seem more pronounced in some countries
with relative water abundance. Particularly acute examples are DRC and Angola, gifted with some of
the most ample supplies of water resources in the world, yet with some of the lowest rates of access

1
Contributors: Laure Redifer and Samba Mbaye.
2
Aquastat is a global water information system, developed by the Land and Water Division of the Food and
Agriculture Organization (FAO) of the United Nations, http://www.fao.org/nr/water/aquastat/main/index.stm. The
main mandate of the program is to collect, analyze, and disseminate information on water resources, water uses, and
agricultural water management, with an emphasis on countries in Africa, Asia, Latin America, and the Caribbean.
3
The concept of “access” masks large discrepancies across regions in the amount of access per person.

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to drinking water in SSA (46 and 54 percent, respectively). On the other hand, other SSA countries
have been successful in expanding access through large-scale investment and sound management
strategies. These countries have often been able to achieve full recovery of costs for drinking water,
partly through the application of a progressive tariff grid (Burkina Faso, Lesotho, Mozambique, and
Seychelles).

Figure 2. Annual Freshwater Withdrawals per Capita

(m3/person/year)

North America

Asia

Middle East and North Africa

Oceania and Pacific

Europe

Latin America and Caribbean

Sub Saharan Africa

0 500 1000 1500

Source: FAO, Aquastat.

3. There is a pronounced lag in the rate of access of rural vs. urban areas. On average in
SSA countries, there is a 28 percentage point gap between urban and rural rates of access to
drinking water.4 In several countries, the responsibility for operating rural water systems has been
decentralized and transferred to local communities, as opposed to urban areas, where the
responsibility generally falls to a publicly owned water utility. Increasing access to drinking water in
rural areas and the efficiency of their operations is one of the main challenges in most African
countries and the object of numerous ongoing initiatives by development partners. To improve rural
access and irrigation, the authorities have often invested in smaller-scale mechanisms, such as wells,
small reservoirs, and rainwater collection schemes.

4. In general, access to improved sanitation in SSA lags far behind drinking water access.
As of 2012, average access to improved sanitation was 35 percent, with a 20 percentage point gap
between urban and rural access rates.5 There are numerous factors responsible for this: cultural,
difficulties in charging for access, lack of maintenance, and hoarding.

5. Water challenges in SSA put significant constraints on growth, but these are difficult
to quantify. Water in most SSA countries is concentrated on agricultural and household use,
followed by energy generation and industrial uses. Because agriculture is a key component of
growth, employment, and subsistence in most SSA countries, water supply and variability are key

4
WHO/UNICEF Joint Monitoring Program for Water Supply and Sanitation, http://www.wssinfo.org/data-estimates/.
5
WHO/UNICEF Joint Monitoring Program for Water Supply and Sanitation.

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determinants of growth, agricultural productivity, and food security. Variations in GDP growth are
highly correlated with rainfall, with growth affected strongly by drought and flood events. A World
Bank study (for period 1981–2004) suggested that GDP growth in Mozambique is reduced by about
1.1 percentage points annually due to the impact of shocks typically occurring every five years
(World Bank 2007a). The vulnerability of agriculture to consistent water supplies also leads to risk-
minimizing strategies that favor low-return, low-risk crops over those with high returns and high
risk. Finally, in many countries, low or difficult-to-access water supplies negatively impact women’s
participation in income-generating activities and education, as women and girls are usually in
charge of fetching water. The costs of gaps in improved sanitation are numerous, including disease,
water contamination, violence, lost time, etc. Sharing access of water across country borders does
not seem to be a large source of stress in SSA, with a few exceptions.

6. Water stress will become more acute going forward, due to high population growth,
urbanization, structural transformation, climate change, and contamination. Currently, most
SSA countries are not classified as “water stressed,” since per capita withdrawals remain lower than
per capita supplies. However, with an average population growth rate of around 2.5 percent, per
capita supplies will quickly diminish. Many countries report that increased urbanization and the
development of more water-intensive activities have put stress on existing infrastructure. Several
countries report that the quality of water resources is deteriorating due to contaminants, ranging
from fertilizers to mining activities. Almost all SSA countries have extensive infrastructure
development strategies for the water sector, many with support from development partners.

B. Key Water Issues in Middle-Eastern and Central Asian Countries6

7. Middle-Eastern and Central Asian countries face important water challenges. Many
countries are faced with high water stress, given limited renewable water resources. Much of the
Middle-Eastern and North African (MENA) region already faces difficulty meeting current water
demand, and per capita water availability in the MENA region is projected to fall by half by 2050
(World Bank, 2007b). Some economies, particularly countries in Caucasus and Central Asia (CCA), as
well as Afghanistan, are highly water intensive while facing significant water stress. Countries in both
the MENA and CCA regions share significant water resources across international borders, adding an
additional layer of complexity to their water management challenges.

8. While past water policy has led to some successes, important challenges remain.
Countries have a long history in implementing water policy, including, over the last few decades,
large public investment programs. As a consequence, the MENA region’s proportion of surface
freshwater resources stored in reservoirs is by far the highest in the world. Overall access to
improved water and sanitation is relatively widespread. However, it has been uneven, with rural
populations in oil-importing countries at particular disadvantage. In addition, individual well drilling
has led the MENA region to use more of its renewable and non-renewable water resources than

6
Contributor: Harald Finger with inputs from the country teams.

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other regions, with regulators having insufficient capacity to control the extraction. There remains
ample scope for improving resource management, in light of continued allocation of water to low-
value uses, significant service outages, vulnerability to droughts and floods, overextraction of
groundwater, and water-related environmental problems.

9. In addition to natural water scarcity in often arid climates, three sets of issues are
important in Middle-Eastern and Central Asian countries:

 Subsidies or lack of metering. The prevalence of water subsidies and/or the failure to properly
meter and bill for water use—both for domestic use and in agriculture—encourages
overconsumption and can imply sizable costs for the public sector (often outside of budgets).
For example, costs are estimated at around 2 percent of GDP in the Gulf Cooperation Council
(GCC) countries, in part reflecting the high costs of desalinating water, which are not passed on
to consumers; and 1 percent of GDP in Algeria and Jordan. Issues of subsidies or lack of
metering are prevalent in Algeria, Armenia, Djibouti, Egypt, the GCC countries, Iraq, Jordan,
Kyrgyz Republic, Lebanon, Mauritania, Pakistan, Sudan, Tunisia, and Turkmenistan. Tajikistan
faces water-related financial sector issues linked to ailing utilities’ defaulted bank loans. In
Yemen, subsidized diesel encourages overconsumption because it makes pumping of
groundwater relatively cheap.

 Infrastructure issues and water management. Aging infrastructure or general lack of

adequate infrastructure lead to low water quality and large network losses in many countries,
reinforcing water shortages. Examples include Afghanistan, Armenia, Azerbaijan, Iraq, Kyrgyz
Republic, Pakistan, Sudan, Turkmenistan, West Bank/Gaza, and Yemen. In a number of cases,
water supply is rationed (e.g., Jordan, Lebanon), leading the private sector to step in with more
reliable but also more expensive ways to supply water (such as with water trucks). The estimated
cost of infrastructure needs to address these issues can be sizable (for example, in Djibouti,
Kyrgyz Republic, and Lebanon).

 Potential for cross-border coordination issues. Actual or potential cross-border issues can
come into play where water sources are shared among countries. These are often linked to
existing or planned dams for flood control, electricity generation, and irrigation. Examples of
cross-border sharing of significant water resources include Egypt/Sudan/Ethiopia,
Jordan/Israel/West Bank, Iraq/Turkey/Syria, Afghanistan/Iran/Uzbekistan/Turkmenistan/Pakistan,
India/Pakistan, Uzbekistan/Tajikistan/Kyrgyz Republic.

10. Water challenges in Middle-Eastern and Central Asian countries can have important
macroeconomic implications. Reliance on, and high variability of rainfall can have a sizable impact
on economic growth, as agricultural output directly depends on it (for example, Morocco). More
broadly, water scarcity constrains productivity of agriculture and, to some extent, industries, thereby
depressing economic growth potential. In some countries, underpricing of water and/or lack of
collection lead to costly resource misallocation (land used for water-intensive crops and housing
construction in dry areas). Sizable water subsidies (and energy subsidies that help users extract
ground water) exacerbate fiscal imbalances and/or crowd out more efficient uses of scarce
resources. Some countries face large water infrastructure investment needs that have significant

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macroeconomic impacts and cannot be met from their own resources or by commercial borrowing
(for example, Djibouti).

11. The region also features some relative success stories. These include Algeria, which has
achieved continuous water supply in Algiers after a decade of massively investing in the water
sector, and Tunisia, which has been implementing active water management policies since the 1970s
and as result has achieved the highest access rates to water supply and sanitation services in the
MENA region. That said, both countries still face important issues such as costly water subsidies.

CASE STUDIES
C. BURKINA FASO7

12. Burkina Faso has Figure 3. Burkina Faso: Total Renewable Water Resources
one of the lowest per (m3/person/year)
capita supplies of water in 60000
SSA and in the world
(Figure 3). A land-locked 50000
West African country, Burkina
Faso’s climate is tropical, 40000
with Sahelian (desert)
dominance. Burkina Faso is 30000
well below the United
Nations water scarcity 20000
threshold, largely resting on UN water scarcity threshold
a crystalline surface that 10000

does not support productive

aquifers. The country relies 0
ZMB
GMB
NGA

GHA

MLI

GNB
CMR
TZA

SLE
MOZ

WORLD
CPV

GNQ
TGO

MUS
KEN

BEN
SEN

GIN
BFA

CIV

STP

MDG

COD

LBR
DJI

BWA

SSA
AGO
ZAF

NER

NAM

exclusively on surface water,

and up to 49 percent of its
renewable annual freshwater Source: FAO, Aquastat.
resources are consumed by
evaporation and, to a lesser extent, water sharing agreements. Thus, water collection, treatment, and
distribution are critical. Water variability is also a major challenge. Rainfall from year to year varies as
much as 50 percent, causing ongoing droughts that affect food security. Seasonal rainfall fills
reservoirs and rivers, but they systematically run dry in the dry season. The timing of rain is a
determining factor: if too much time elapses between rainfalls, crops fail, even in abundant rain
years.

7
Contributors: Laure Redifer and Samba Mbaye.

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13. However, Burkina Faso’s low level of water use has kept supply constraints from being
binding. Annual water withdrawals per capita are half the SSA average and about one-eighth the
world average. Low use compared to SSA is related to depth of access, as an adaptation to scarcity,
and low access to improved sanitation (Table 1). Agriculture accounts for the lion’s share of usage.
Water scarcity and variability have brought about innovation through increasingly efficient home-
grown means for meeting agricultural demands for water. For example, in sugarcane fields, large
cisterns collect water and distribute it via highly water-efficient drip irrigation methods. The
introduction of genetically modified cotton allowed more drought- and pest-resistant plants that
required one-third the fertilizer applications and doubled yields.

Table 1. Burkina Faso: Selected Indicators

Annual water withdrawals Percent of pop. With Percent of pop. with access Dam capacity
per person (m3) access to improved water to improved sanitation per capita (m3)

Burkina Faso 62 82 19 321

SSA average 152 73 35 1146
World Average 473 89 72 1785

Sources: WHO/UNICEF, Joint Monitoring Program and FAO, Aquastat.

14. Despite major strides on drinking water in urban areas, a significant rural-urban gap
remains, and progress on
Figure 4. Burkina Faso: Actual and Projected
improved sanitation has
per Capita Supply and Use, 2000–30
lagged considerably. Over
(m3)
the last two decades, access
1600
to drinking water has
doubled, with nearly universal 1400
Renewable water resources per capita
access in urban areas and 1200
access in rural areas only
1000
catching up to earlier urban
levels. While the Millennium 800
Development Goals (MDG)
600 Annual water withdrawals per capita
target for drinking water has
already been met, with the 400

5th highest progress in the 200

world, the target for improved
0
sanitation will not be met 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030
(WHO and UNICEF, 2014).
Sources: FAO, Aquastat; World Bank, World Development Indicators; and IMF
Access to improved sanitation
staff calculations.
is constrained by an acute
deficit of infrastructure.

15. Going forward, water demand is likely to outpace the country’s low supply, reflecting
mainly population growth, urbanization, and climate change. As a function of population

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growth alone, per capita water use could outstrip supply in roughly 10 years. In addition, water
pollution (including fertilizers and cyanides in informal mining), encroaching desertification, and
land degradation will put pressure on supplies (Figure 4).

16. Burkina Faso’s water Figure 5. Burkina Faso: Real Growth and Rainfall
challenges impose significant 10 10000
constraints on growth and social 9
Real GDP growth (LHS, y/y percent change)
9500
outcomes, with significant fiscal
8
costs (Figure 5). The main 9000
7
channel of impact on growth is 8500
6
the agricultural sector, which
employs a large majority of the 5 8000

population (70 percent of the 4

7500
labor force), provides a significant 3
Total annual rainfall (RHS, millimeters) 7000
contribution to growth 2

(25 percent), and is highly 1

6500

dependent on annual rainfall. 0 6000

Growth is indirectly impacted by 2000 2002 2004 2006 2008 2010 2012

the health consequences of low Sources: Burkinabe authorities and IMF staff estimates.
access to drinking water and
improved sanitation and the costs associated with water fetching, especially for women. The World
Bank’s Water and Sanitation Program recently estimated that the cost of insufficient access to
improved sanitation in Burkina Faso was as much as 2 percent of 2010 GDP, but addressing the
sanitation deficit will require substantial infrastructure investment. Beyond infrastructure costs, fiscal
costs include contingency food stocks, subsidized prices, and distribution mechanisms to ensure
food security in light of ongoing droughts and floods. The 2011–12 drought, for example, created
fiscal costs of around 2–5 percent of GDP.

17. In the face of its considerable water challenges, Burkina Faso has developed a widely
praised approach to water management. Two aspects of its strategy are particularly notable:
(i) water access in urban areas; and (ii) investments in agricultural productivity and water storage and
irrigation. These investments have coincided with a sustained increase in growth and a concurrent
drop in its variability. Five-year average real growth doubled between 1990 and 2012, with a decline
in the standard deviation from 3.8 to 2.5 percentage points over the same period, despite numerous
shocks.

18. Burkina Faso’s public water utility (ONEA) has been responsible for a remarkable
improvement in the population’s access to drinking water (Figure 6). The company is charged
with water management in urban areas. In the early 2000s, three-year performance-based service
contracts between ONEA and the government were introduced, bringing in experienced private
management from abroad, combined with large infrastructure investments by donors. Elements of
the public-private partnership that were essential to its success include: arm’s length management
contracts; performance benchmarking with independent monitoring; new infrastructure investments

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based on strict financial sustainability; performance-based compensation for the private manager;
and cost recovery tariffs. As for the latter, a progressive tariff grid was introduced for drinking water,
based on the volume of use, with the higher tiers subsidizing the lowest tier, as well as part of
sanitation activities. The company has recovery bill rates of 97 percent and low debt ratios and
realizes annual profits.

Figure 6. Burkina Faso: Access to Water and Sanitation

(Percent of population)
Access to improved drinking water Access to improved sanitation
100% 60%
Total Urban Rural Total Urban Rural
80%

40%
60%

40%
20%

20%

0% 0%
1990 1995 2000 2005 2010 2012 1990 1995 2000 2005 2010 2012

Source: WHO/UNICEF, Joint Monitoring Program.

19. A second notable aspect of Burkina Faso’s water management strategy has been its
aggressive investment strategy to improve resilience to water scarcity and variability. In the
context of its development strategy, since the mid-2000s the country has invested extensively in
water collection and storage and productivity-enhancing initiatives in agriculture, including
reservoirs, irrigation, crop rotation, genetically modified cotton, and diverse crops. Agricultural
productivity has increased notably and cash crops are no longer lost to droughts. One unique
innovation is the Bagré “growth pole.” Thirty years ago, the river basin was plagued by river
blindness. The government bought the land, relocated residents, and flooded the valley to create a
huge man-made reservoir. In the past 10 years, the government has invested in industries and
supportive services to attract private investors and create jobs around the water source. The
reservoir now supports fishing, irrigation for diverse crops, livestock and dairy, eco-tourism, and a
hydro-electric power plant.

20. Despite having one of the most challenging water situations in SSA, Burkina Faso has
been one of the continent’s best performers in providing access to water for its population
and reducing its vulnerability to water variability. Some lessons include:

 Restricted access/high costs for water can bring about home-grown solutions to improve
efficiency and reduce per capita use.

 Public water utilities can achieve cost recovery for drinking water access. ONEA’s focus on
independent management, cost recovery, financially sustainable investment, quality of service,
and social objectives serve as a model.

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 Resilience to variability of water supply can be improved through aggressive government

investment strategies, including in introducing diversified crops, land rotation, and use of new
technologies (GMO cotton seeds). The decline in the volatility of growth in Burkina Faso
suggests that the government’s aggressive investment strategy has yielded benefits fairly
quickly.

 Avoiding water stress will require more aggressive policies in the future, particularly for countries
with high population growth. Even after significant investment, Burkina Faso still faces major
water challenges, including a large infrastructure gap, low access to sanitation, and still high
vulnerability to water shocks. Going forward, the country will face more pressure on its already-
scarce resources, as a result of high population growth, contamination, urbanization, climate
change, and structural transformation.

D. DEMOCRATIC REPUBLIC OF THE CONGO8

21. The Democratic Republic of the Congo (DRC) has more than half of the water
resources of sub-Saharan Africa (SSA). The country’s territory is covered by a large system of
rivers and lakes, providing 19,967 cubic meters of freshwater per person per year for an estimated
population of 77 million, well above the SSA average (14,048.97 cubic meters). In addition, the DRC’s
large rivers offer a vast potential for electric power generation because of the strength and low
variability of the water flow. Rainfall is reliable and abundant across most of the country, averaging
1,545 millimeters (mm) per year, more than twice the continental average of 680mm per year.

22. Despite water abundance, current water usage is far below SSA averages, implying
significant untapped economic potential. The population’s consumption of drinking water is
far below the regional average, and only a fraction (6,800 hectares in 2000) of the potential
4 to 7 million hectares of agricultural land are irrigated. Currently, 356 million cubic meters of water
are withdrawn every year, less than 1 percent of the available renewable water resources. That is
around 7 cubic meters per person per year against an SSA average of 152 cubic meters, reflecting
the poor state of water infrastructure in DRC. Only 46 percent of the population has access to
improved drinking water against an SSA average of 73 percent (Table 2).

Table 2. Democratic Republic of the Congo: Selected Indicators

Percent of pop. With Percent of pop. with access
Annual water withdrawals
access to improved water to improved sanitation
per person (m3)
(2012) (2012)
DRC 7 46 31
SSA average 152 73 35
World Average 473 89 72

Sources: WHO/UNICEF, Joint Monitoring Program; and FAO, Aquastat.

8
Contributors: Rodolfo Maino and Klaus Peter Hellwig.

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23. The unavailability of safe drinking water and poor sanitary conditions pose a major
threat to public health. The difficult sanitary conditions are a root cause of poor health outcomes
in DRC. The mortality of children under the age of five in DRC (11.9 percent) remains higher than in
SSA (9.2 percent), with a high prevalence of diarrhea and recurring outbreaks of cholera and other
diseases linked to unsafe water. Moreover, malnutrition associated with a lack of safe water
continues to affect large parts of the population.

24. The DRC stands as a prime example for the urban/rural gap in access to water that
characterizes the water sector throughout SSA. There is considerable heterogeneity in access to
improved water with 79 percent of the urban population having access against 29 percent in rural
areas. The level of access to improved sanitation facilities is comparable, though low at 29 percent in
urban areas and 33 percent in rural areas.

25. Poor management of the water resources has contributed to the weak water
outcomes. Since 1990, the national public water utility for urban areas (REGIDESO) has experienced
a steep decline in its operational performance. As a consequence, the country’s urban water supply
coverage rate fell from 88 percent in 1990 to under 79 percent in 2012. Most of REGIDESO systems
serving secondary towns are presently out of service due to the combined effect of a lack of
electricity and the absence of new investment and maintenance. Moreover, operating costs are
significantly higher in DRC than in other SSA countries, weighing heavily on the water administration
authorities’ finances. Staff expenses amount to 35 percent of REGIDESO’s turnover, against
20 percent in Burkina Faso. In addition to its inadequate size, the composition of REGIDESO’s staff is
skewed toward executives and clerical workers instead of field agents. REGIDESO’s dire financial
situation is compounded by the lowest bill collection rate in SSA as well as an inadequate tariff
structure. The current water tariff structure results in a billing price that is, on average, 80 percent of
production cost.

26. Many years of civil war have also been a contributing factor. The armed conflict that has
ravaged the DRC since 1997 has led to the destruction and pillaging of crucial water infrastructure.
Likewise, critical maintenance work has been neglected over these years, resulting in a sharp drop in
access to improved water and sanitation in urban areas from their pre-conflict levels of 88 percent
and 32 percent in 1990. Similarly, the use of irrigation in agriculture was more widespread before
the civil war with 13,500 hectares of land under irrigation in 1995.

27. Lack of reforms and a poor regulatory environment hamper progress. While improving
the water infrastructure would require large investments, the slow pace of institutional reforms
remains the main impediment for immediate progress. The water sector is governed by a multitude
of conflicting laws and regulations with policies falling into the domains of several ministries and
agencies at the national, provincial, and local levels. While a coordinating body has been put in
place, a clear distribution of responsibilities is still missing. A proposed law to address these
deficiencies and reform the water sector has yet to be passed. As a consequence of the low
implementation capacity, only 50 percent of the resources originated from donors and devoted to
water projects can be absorbed. Achieving the MDG targets (providing access to safe water to
71 percent of the population by 2015) remains out of reach. To meet its own less ambitious goal of

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providing safe water access to 50 percent of the population, the government estimates a required
investment of US$171 million per year. In 2007–08, public expenditure on water and sanitation was
around US$65 million, or less than US$1 per person.

28. The main takeaways of the DRC water situation are the following:

 Strengthening the institutional environment is crucial for adequate management and expansion
of the water infrastructure. The water situation in DRC mirrors the weaknesses of other sectors
(mining, oil extraction), where delays in the passage of crucial legislation and limited capacities
of state institutions such as ministries and administrative bodies are impeding a full exploitation
of an otherwise abundantly available and diversified natural resource.

 The current cross-subsidized system among user categories is not working properly given the
very low collection rate.

 Investment in the water and sanitation infrastructure is a potential channel for enhancing the
inclusiveness of growth in DRC. Currently, there are large regional differences in the allocation of
investment, with a large share of public expenditure directed toward Kinshasa. A more equitable
distribution of funds could reduce the urban/rural gap in access to water and sanitation and let
the most disadvantaged benefit from DRC’s recent growth of mining export revenues.

 Despite the abundance of water resources, international coordination is important for medium-
term sustainability. The DRC’s surface waters draw from a wider basin covering 10 countries, and
major developments in upstream countries would directly affect the quality and quantity of
water available in DRC.

E. PAKISTAN9

29. Despite having the world’s largest glaciers, Pakistan is facing the prospect of water
scarcity. Pakistan is among the world’s 36 most water-stressed countries, with its agricultural,
domestic, and industry sectors scoring high on the World Resource Institute’s water stress index.
Per capita annual water availability has dropped, fundamentally due to population growth, from
5,600 cubic meters at independence to the current level of 1,017 cubic meters, and is projected to
decline further under the current infrastructure and institutional conditions (Figure 7). Demand for
water is on the rise, projected to reach 274 million acre-feet (MAF) by 2025, while supply is expected
to remain stagnant at 191 MAF, resulting in a demand-supply gap of approximately 83 MAF.
Concerns over this widening gap between water supply and demand are compounded by certain
characteristics of Pakistan’s geography, climate, and hydrological cycle:

 Pakistan depends on a single source, the Indus system and its tributaries, for most of its water
supply needs. Fed mostly by snow and glacier melt in the greater Himalayas, water availability in the
Indus system is highly seasonal, with 85 percent of annual river flows occurring during the June-

9
Contributors: Mansoor Dailami, Tasneem Alam, and Hiba Zaidi.

12 INTERNATIONAL MONETARY FUND

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September period, which coincides with the concentration of rainfall in the monsoon. Rainfall varies
from 1,500 mm per year in northern Punjab to 150 mm per year in upper Sindh province.

 Pakistan is exposed to Figure 7. Pakistan: Water Availability

extreme weather (m3/person)
conditions, including
severe episodes of floods 6000 250

and droughts that wreak

significant damage on the 5000
200
country’s agricultural,
Population in millions (RHS)
livestock, and water 4000
150
infrastructure. Much of
these costs have been 3000

attributed to lack of 100

adequate storage 2000
Per capita availability in m³ (LHS)
capacity and control
50
structures. Total dam 1000

storage in Pakistan
represents only 30 days of 0 0
1951 1961 1971 1981 1991 2001 2011 2020 2025 2030 2040 2050
average demand,
compared to 1,000 days
for Egypt and 220 days Source: Pakistan’s Water and Power Development Authority.
for India.

30. Pakistan needs to develop an integrated approach to water resource management that
prioritizes conservation and sustainable water use through improved cost recovery,
upgrading infrastructure, and bringing agriculture under the tax regime. Pakistan has a long
history of water resource development, in close engagement with the international donor
community. The key challenges facing the country have been well articulated, with a fair degree of
consensus emerging on the main policy and institutional reform imperatives. These include:
 Reform water tariffs and cost recovery. Tariff reform is critical to ensure sustainable water use
in both the agricultural and urban sectors. Canal water is heavily underpriced and cost recovery is
poor, resulting in high inefficiency in the use of water and a financially unsustainable irrigation
system. The prevalent irrigation water charges (abiana) only recover 24 percent of the annual
operating and maintenance costs, and collection is only 60 percent of total receivables, imposing a
drain on the government budget. The pricing structure for major crops is uniformly based and, thus,
does not reflect differential water consumption, even though, for instance, rice consumes 60 percent
more water than cotton does. This has impeded adoption of more efficient technology and high-
value crops. Furthermore, excessive irrigation water use has resulted in poor water quality
(36 percent of groundwater is highly saline). Similar problems of inadequate tariff and low cost
recovery have afflicted urban drinking water. Tariffs for water utilities for consumption in households
are quite low and have not been revised for several years. Tariff collection varies from 20–80 percent
across cities. Access to piped water supply in rural and small towns remains inadequate.

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 Increase investment in water infrastructure. Pakistan’s water infrastructure was historically

built to cater to the needs of agriculture, but as urbanization accelerates and industry grows, there
will be significant investment needs to build the necessary infrastructure to supply safe drinking
water and sanitation. Currently more than 35 percent of the population lacks access to safe drinking
water. Harnessing Pakistan’s huge hydro potential through construction of new dams and
hydropower projects, as highlighted in National Power Policy 2013, also deserves serious attention.
With hydro potential of 50,000 megawatts of electricity generation, Pakistan could overcome its
energy shortage several times over, notwithstanding the seasonality involved in hydropower
generation. Of this potential, only 13 percent has been developed so far at a relatively low cost of
2 cents/kilowatt hour. The country’s two existing mega hydropower dams—Mangla and Tarbela,
commissioned in 1967 and 1976 respectively—are losing their storage capacity because of rapid
silting. In both urban and hydro sectors, reliance on private investment and capital needs to be an
integral part of the solution.

31. There are both equity and efficiency rationales for bringing agriculture within the tax
net. Because of the country’s arid and semi-arid climate, agriculture in Pakistan is predominantly
irrigated (90 percent) and consumes about 95 percent of annual available surface water. Though the
bulk of farmland is irrigated through the canal system, farmers utilize water from other sources,
including groundwater exploitation, and this has increased significantly in recent decades:
subsidized water and electricity tariffs have induced adoption and expansion of electric pumps to
tap groundwater at an alarming rate. Approximately 60 percent of farm-gate-delivered water in
Punjab comes from tube wells. Yet agriculture is largely untaxed (contributing less than 0.1 percent
of total tax revenues), even though it accounts for 21 percent of GDP and employs 43 percent of the
population.

32. Given water’s multifaceted development role and its global dimension, there is room
for closer engagement of the IMF through awareness raising and leveraging the ongoing
lending arrangement. The IMF’s support for water reform in Pakistan should focus on agriculture
taxation in the context of the upcoming National Finance Commission’s (NFC’s) award; phasing out
electricity subsidies; and policy design for water pricing as part of the broader energy sector reform.

33. What are the lessons? Water can serve as an engine of economic growth and regional
trade expansion in Pakistan. The country has the necessary natural endowment and is blessed with
the world’s most extensive irrigation system. Harnessing such potential needs virtually a paradigm
shift in reframing water policy and management in a national context that emphasizes demand-side
measures that would promote conservation and control of excessive groundwater exploitation.
Pakistan has a long history of experience with supply-side measures, including construction of mega
hydro power projects and dams. Moving forward, the thrust of policy reform needs to be on
improving water-use efficiency in agriculture, which continues to dominate water consumption while
escaping taxation at the federal level and lightly taxed at the provincial level. This would require
greater engagement of stakeholders at the local level in water management and capacity building of
water management institutions. Furthermore, encouraging the provinces to reform their agriculture
taxation systems in the context of the forthcoming NFC award could be a major step in overcoming

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the entrenched political interests of powerful landowners and bringing agriculture into the tax net.
The nexus between water and electricity is the other area calling for reform of water and electricity
subsidies. Reforming NFC revenue-sharing mechanisms and phasing out electricity subsidies are two
major reform areas supported by the current IMF Extended Fund Facility for Pakistan.

F. SINGAPORE10

34. Singapore is a densely populated city-state with no natural fresh water resources,
apart from rainfall. It is located on an island (and some 60 small islets) with a total area of some
714 square kilometers (roughly the area of five boroughs of New York City). With a population of
almost 5½ million, the country is third in the world in terms of population density. Ever since
achieving independence, the authorities have been looking into ways to secure its water supply.
The “Four Taps” strategy, which looks into alternative sources of water, was put in place in the late
1990s and aims at achieving self-sufficiency by 2062. The Singaporean approach is not limited to
diversification of the supply sources. It also relies on demand management tools, research and
development (R&D), and broad public support.

35. The Four Taps, the four sources of water, are:

 Imports (up to 1,100 thousand cubic meters a day) have been the main source of water since
1932, when a pipeline from the Malaysian state of Johor was inaugurated. Under the current
agreements, expiring in 2061, the country is entitled to receive up to 60 percent of its current needs.

 Local catchment water (900–1,400 thousand cubic meters a day) is collected from about two-
thirds of the country’s territory through a system of 17 reservoirs (started in 1868) and a
comprehensive network of drains, canals, rivers, and storm-water collection ponds. The catchment
territory is classified as partly protected with certain restrictions on land use in place, with land and
water management processes closely integrated. Reservoir water is treated through chemical
coagulation, rapid gravity filtration, and disinfection.

 Reclaimed water (up to 520 thousand cubic meters a day) refers to used water turned into
potable using advanced membrane technologies. The NEWater project originated in 1974 but had
to be shelved until 1998 given unreliability of the process and high costs. Today four plants meet up
to 30 percent of the nation’s water needs, and the capacity is to be expanded to 55 percent by 2060.
Although quality of treated water exceeds the WHO standards for drinking water, it is mostly used
by industries for non-potable uses.

 Desalinated seawater (up to 230 thousand cubic meters a day) is produced by two plants that
were launched in 2005 and 2013, are among Asia’s largest seawater reverse-osmosis plants, and
allow meeting up to 25 percent of the current water needs. The plan is for this source to continue
supplying a quarter of the country’s water needs in the 2060s.

10
Contributor: Robert Tchaidze.

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36. Singapore employs a pricing policy that aims at discouraging excessive use of water
and recovering costs to the fullest extent possible. Unlike in many other countries, both
domestic and non-domestic users face the same base tariff, with no cross-subsidization of
households by industrial and commercial users. Moreover, beyond a certain level of consumption,
households face an additional surcharge that brings the total tariff to the rate higher than that for
commercial and industrial users. There is no subsidized “basic” consumption; instead
the government provides targeted help for low-income families. Consumers are also charged a flat
water-borne fee (to offset costs of treating used water and maintaining public sewage system; for
non-domestic users this fee doubles); a flat sanitary appliance fee (charged per sanitary fitting); and
a progressive water conservation tax (supposed to reflect the marginal cost of the “next,” alternative
water sources, including the R&D costs).

37. Rigorous management practices, continued investment in new technologies, and

involvement of the broad society are other building blocks in the Singaporean approach.
Singapore has a single agency—the Public Utilities Board (PUB)—that is responsible for all aspects
of the water cycle, such as collection, production, distribution, and reclamation. The PUB is
autonomous and enjoys support both from politicians and the general population. It undertakes
significant investments in its own assets as well as assets that are in the government’s ownership,
but under its management (such as sanitation and drainage infrastructure). Since 2005 it has
regularly issued bonds to finance some of these investments.

38. Opening the third and fourth taps would have been impossible, had it not been for
decades of investment into research and development of new, revolutionary technologies.
The PUB cooperates with local and international researchers by making its research facilities
available as test-beds and by sharing the costs and risks associated with these tests. This allows it to
attract both private and public sector innovators and to remain ahead of the curve in
implementation of new technologies. In addition, the National Research Foundation promotes R&D
in the water sector through an inter-agency outfit, Environment and Water Programme Office, led
by the PUB. Finally, an Institute of Water Policy has been established at the National University in
2008.

39. Given the emphasis put on water-related R&D by the government, Singapore has
emerged as an international hub for water-related research. Today, the country is home to over
70 local and international water companies and more than 20 research and development centers. It
also hosts an annual event, the Singapore International Water Week, where key global industry
players share and co-create innovative water solutions.

40. The PUB encourages every segment of the society to engage in efforts to make use of
water resources more efficient. This is done through various public programs that aim at the so-
called 3P of population and public and private sectors and call for cleanup, beautification, and
conservation of water resources. The PUB also gathers feedback on its work and suggestions for
alternatives from the water industry and the broad community.

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41. What are the lessons? High-level political support for long-range policy objectives and
strong institutions, including an autonomous technocratic institution such as the PUB, seem to be
among the key factors that enabled Singapore to put in place such a comprehensive strategy. The
rapid improvement in living standards and industrialization of the economy, with a significantly
reduced role of the agricultural sector, may have helped secure broad support for the government’s
water management policies.

G. YEMEN11

42. Yemen is one of the world’s most water-deficient countries. The extremely low level of
water has led to increasing local conflict over water rights since the year 2000. Groundwater and
rainfall are the sole sources of freshwater. Water availability per capita is around 2 percent of the
world average, and has been trending downward in recent years, from 113 cubic meters in 2002 to
86 m3 in 2013. Over the same period, access to “improved water sources” declined from 60 percent
to 55 percent of the population in aggregate. Both urban and rural population access to safe water
also declined, with the latter now standing at 46 percent (Figure 8).

43. Demand for water is rising, while renewable supply has remained stable and
groundwater is being depleted. Several factors contributed to the surge in demand for water in
recent years, including rapid population growth, urbanization, and economic growth. Annual
freshwater use has increased from 3.4 billion m3 in 2002 to 3.9 billion m3 in 2010. Meanwhile, annual
renewable supply remains relatively constant at 2.5 billion m3 during the same period, and the
inefficient and unregulated use of groundwater is depleting Yemen’s deep aquifers.

Figure 8. Yemen: Water Access and Population Growth

(Percent of population, percent)

Source: World Bank, World Development Indicators.

11
Contributors: Mohd Zaher and Fouad Al-Kohlany.

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44. Disparity in access to safe water follows the poverty map. The majority of urban
consumers have access to a public water network, even though around 40 percent rely on trucked
water; this figure is considerably higher for rural residents because fewer people are connected to
public water networks. According to the World Bank, the cost of trucked water is up to 10 times that
of network water.12 The cost and effort involved in obtaining safe water are also considerably less for
the well-to-do, compared to the poor. The high cost of water is forcing many rural women and girls
to walk for hours fetching water.

45. The bulk of water resources is consumed by the agricultural sector, supported by
generous diesel fuel subsidies. The share of the agricultural sector in water consumption remained
relatively stable over the last decade, around 91 percent. Irrigating qat, a local cash crop and a mild
stimulant, consumes around 40 percent of water used in agriculture. Similar to qat, a significant
portion of agricultural exports, such as bananas, is also water intensive. The expansion of these crops
has benefited from subsidies, which kept the price of diesel fuel, used in pumping groundwater for
irrigation, extremely low until mid-2014.

46. The authorities have reduced fuel subsidies and raised the price of diesel by 50 percent
since July 2014. While this move was largely motivated by the need to reorient public spending in
favor of growth-oriented capital and development spending, it is expected to reduce the rapid
depletion of groundwater resources and the distorted production costs that favor water-intensive
crops such as qat. At the same time, to improve the poverty orientation of the budget, the
authorities have increased the Social Welfare Fund monthly transfers to households by 50 percent.

47. Notwithstanding data limitations, a number of indicators point to significant socio-

economic costs associated with water shortage in Yemen. The contamination of water sources
and the decline in water availability to households have contributed to the spread of diseases in
rural areas. Water and fuel shortages—particularly acute before the reduction in fuel subsidies—and
more recently the increased production costs resulting from higher fuel prices have also placed
farmers and agricultural workers at risk of unemployment, further exacerbating Yemen’s economic
situation.

48. Going forward, the water situation in Yemen is expected to deteriorate further.
Assuming the continuation of the current consumption and production patterns, weak governance
will impose a toll on the water sector. The fact that groundwater—which is by nature the most
difficult to regulate—plays a key role in Yemen makes the governance of the sector particularly
challenging. Recent estimates show that non-renewable water resources are expected to be
exhausted within one to two decades in the most densely populated highlands, putting major
Yemeni cities in a dire water situation. Sana’a, the capital city, is 2,000 meters above sea level in the
water-scarce mountain ranges, where the groundwater table is dropping by more than six meters a

12
World Bank 2012.

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year. The location and altitude of the capital city are also making the cost of trucking or pumping
water from coastal areas very expensive.

49. The government’s response to the water crisis has been lagging. With help from the
World Bank and GIZ, the government of Yemen introduced a water sector strategy in 2005, with the
chief objective to gradually reduce the rate of groundwater depletion. The strategy has had no
impact beyond enhancing awareness of water challenges in Yemen. Minimal impact on water usage
and practices has been observed.

50. Political instability over the past four years hampered investments in the water sector
and raised costs. The difficult security situation, lack of government presence in certain areas, and
the inability to enforce the rule of law have all weakened the government’s endeavors to rationalize
water usage. The impact of the 2011 crisis on the water sector was severe. There has been
widespread damage to installations and equipment and declining rates of water billing and
collection.

51. Desalinization has been proposed as a long-term answer. However, this is an energy-
intensive solution and will require large long-term investment. Without donors’ support, this
solution seems infeasible, especially as the country’s fiscal balances can barely support its basic
infrastructure needs. Furthermore, restoration of security in Yemen remains a priority to resume
many of the foreign-financed water projects suspended following the 2011 crisis.

52. In summary, Yemen’s water future appears challenging, and a broad reform agenda is
needed to rationalize water consumption and improve efficiency. Unless addressed properly,
the water sector difficulties could further delay the country’s development, lead to internal migration
and tribal conflict, and increase the cost of water in the major urban centers. Any viable solution
should incorporate better management of water resources, public and private investments, foreign
aid, closing the urban-rural water gap, and boosting water supply. As the largest water consumer,
the agricultural sector in Yemen deserves special attention. Efforts should be scaled up and directed
toward enhancing the efficiency of production and irrigation. The high urbanization rate in Yemen
also requires the achievement of more inclusive growth to moderate the unbalanced growth of
urban areas. Strengthening regulation and enforcement mechanisms is a priority to stop the
widespread and unregulated extraction of underground water. Reforms should also encompass
creating an enabling business and regulatory environment to encourage more active private sector
participation in financing water projects and infrastructure.

53. The water sector will benefit from the full implementation of structural reforms
embedded in the Extended Credit Facility program (ECF). Improving the overall efficiency of the
economy through macro-critical structural reforms, particularly in terms of completing the phase-
out of highly distortive energy subsidies, directing public resources to growth-enhancing investment
and poverty-reducing transfers, and improving public sector management, will also benefit the
water sector. These will be in the form of efficiency gains and water savings as farmers adapt their
farming practices in response to changes in cost of inputs. Supporting the private sector’s activity

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and investments will also benefit from enhanced financial intermediation, better access to finance by
small and medium-size enterprises, and an improved business environment.

54. The way forward: there is an urgent need for Yemen to improve its water resource
management. A broad reform agenda, along with well-coordinated donor support, is needed to
boost water supply, rationalize consumption, and improve efficiency. Most important, Yemen needs
to implement price-based reforms and to change the legal and social understanding of water rights
to reflect the true cost of water resources and minimize inefficient use.

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