Finance for WASH and its effective utilization is critical for extending and sustaining WASH services.

 

 This section focuses on the development and implementation of WASH financing plans and strategies, cost estimates for plans and strategies, adequacy of financial resources for WASH, government budget data, cost recovery, and WASH expenditure and its sources.

Having WASH financing plans/strategies is one way to strengthen system performance and make better use of existing funding by defining and prioritizing capital needs, improving government coordination and transparency, and defining the desired levels of service while identifying the existing and potential sources of revenue. Despite the potential, more than a third of countries have reported that three WASH areas – hand hygiene, WASH in schools and WASH in health care facilities – do not have financing plans/strategies to identify funding sources and guide investments, although potentially these are integrated into broader education or public health strategies (Fig. 6.1). Furthermore, while it is encouraging that 75% of countries reported the existence of financing plans/strategies for drinking-water and sanitation, opportunities to improve plan implementation are high, especially for rural sanitation where 34% of countries reported insufficient implementation.

In terms of urban and rural areas, 60% of estimated WASH strategy costs reported by countries are for urban WASH investments versus 40% for rural WASH investments. In terms of services, 67% of estimated WASH strategy costs reported by countries are for drinking-water investments, while 33% are for sanitation investments. 

Adequate financial resources are essential for the WASH sector to expand and enhance services, maintain existing infrastructure, carry out effective O&M and support proper planning. While countries have made improvements in costing WASH plans and increasing WASH budgets, the lack of sufficient financial resources continues to be a critical issue, slowing progress in service provision and hindering service quality. As in previous GLAAS cycles, countries were requested to provide information on the sufficiency of funding in two areas: 

(a) to implement WASH plans/strategies and 

(b) to reach national targets (which may extend beyond current WASH planning cycles). 

Despite some year-to-year variation, from the GLAAS 2013/2014 cycle to the 2024/2025 cycle, over 75% of countries consistently reported insufficient funding to implement sanitation plans/strategies and to achieve national sanitation targets, while over 66% of countries reported insufficient funding to implement drinking-water plans/strategies and to reach national drinking-water targets. 

However, incremental improvements have been seen from the GLAAS 2018/2019 cycle to the 2024/2025 cycle, when the percentage of countries reporting sufficient funding to reach WASH targets doubled for urban and rural sanitation and rural drinking-water, albeit from low numbers in 2018 (from 7% to 14% for sanitation, and from 7% to 16% for rural drinking-water for 45 countries that participated in both the GLAAS 2018/2019 and 2024/2025 cycles). Table 6.1 presents summary results from the GLAAS 2024/2025 country survey for all responding countries. Fewer than 25% of countries indicated they have sufficient funding to implement their plans, and fewer than 20% of countries estimated they have sufficient funding to achieve national targets.

In addition to the country estimates of financial sufficiency, 20 countries were able to report quantitative funding gaps by sub-sector based on specific needs estimates and available funding (Fig. 6.4). Estimates of national funding needs came from national development plans, action plans, sector development plans, budgets and cost studies. For these 20 countries, it was estimated that US$ 20.8 billion is needed per year to reach national targets for WASH and that US$ 11.2 billion per year is available. The funding gap for urban sanitation is the largest of the four WASH sub-sectors,16 with an annual funding gap for 17 countries of US$ 4.4 billion, or 57% of US$ 7.7 billion in cited urban sanitation needs. Across WASH, the resulting funding gap of 46% in these countries reinforces estimates suggesting that greater investment is needed to achieve WASH targets.

While these funding gaps remain significant, limited quantitative data from countries indicate there have been improvements in reducing gaps from 2021 to 2024. For example, half of countries (four of eight) that reported urban sanitation needs and available funding in both the GLAAS 2021/2022 and 2024/2025 cycles indicated funding needs and funding gaps for urban sanitation have declined (Table 6.2). The funding gap for these eight countries was reduced from 30% to 23% of total needs. Similarly, the rural sanitation funding gap was reduced from 55% to 42% of total needs for seven countries that reported data in both GLAAS cycles.

Fifty-eight countries reported information on their WASH-specific government budgets. While the quantity of financial data has improved with each successive GLAAS cycle, it is important to note: (a) some countries reported budgets for just a few ministries and institutions and not for all agencies/institutions involved in WASH; (b) a few countries reported only a collective budget for all WASH; (c) WASH budget allocations may be under-reported due to the lack of disaggregated budgets for certain ministries; (d) WASH budget allocations may vary over time due to data availability differences or different methods used to determine the budgets from one GLAAS cycle to another; and (e) WASH budget allocations may show some variability among countries, depending on whether countries included activities beyond drinking-water and sanitation services provision and hand hygiene, such as water resources and waste management. Annual aggregate WASH budgets ranged from over US$ 2.3 billion in Argentina, to less than US$ 1 million in some less-populated countries. Overall, the annual WASH budget per capita for these 58 countries ranged from less than US$ 1 to US$ 1033. Reporting of low WASH budgets in some countries may arise from various factors. In certain cases, user contributions – through tariffs and out-of-pocket spending – may serve as the primary source of WASH funding and investment. In other cases, the scope of budgets may cover only certain WASH functions such as planning and oversight, and may not reflect the cost of service provision or investment. Additionally, lack of available disaggregated budget data may also cause some under-reporting. Conversely, low government spending may simply reflect insufficient public investment in the sector.

Government budgets for WASH may include on-budget donor grants or loans. While donor support may be a small proportion of overall WASH funding, nearly half of responding countries reported at least one government ministry or institution receives a significant share (greater than 25%) of its WASH budget from donors. Institutions supported include the ministries of water, environment and health, and national utilities. For example, in the Syrian Arab Republic, the Ministry of Water Resources receives financial support from donors, accounting for more than 25% of the drinking-water budget, and in Lesotho, the Ministry of Natural Resources (Water) receives significant donor funding, primarily for water infrastructure projects and capacity-building.

Maintaining comparable WASH budget data across survey years within countries depends on several factors, including the consistency of ministries involved in WASH reporting, the availability of disaggregated budget data and variations in reporting practices. Country-reported budgets were compared to previous reporting cycles at the ministry level. Variability in these budgets can arise from a range of factors, such as shifts in sector priorities, overall government budget increases/reductions, phased financing of large infrastructure projects, or changes in ministry staffing, roles and responsibilities. Examples of budget increases that have outpaced inflation reported in the GLAAS 2024/2025 country survey include the following. 

• In Mexico, the National Water Commission reported a nominal WASH budget increase from 13 711 million to 41 572 million pesos (US$ 611 million to US$ 2341 million) from 2020 to 2023. 

• In Tunisia, the National Sanitation Office increased its nominal budget from 231 million to 903 million dinars (US$ 82 million to US$ 291 million) and the National Water Supply and Distribution Company increased its nominal WASH budget from 332 million to 702 million dinars (US$ 118 million to US$ 225 million) from 2020 to 2024. 

Forty-eight per cent of countries (13 of 27) reported reductions in national WASH budgets. Examples of budget decreases and budgets that have not outpaced inflation include the following.

 • In Bangladesh, while Water and Sewerage Authorities and the Department of Public Health Engineering reported a nominal WASH budget increase from US$ 788 million to US$ 841 million, this increase is diminished to a decrease of 22% when adjusted for inflation. It was also offset by the Ministry of Local Government, Rural Development and Cooperatives, which experienced a WASH budget decrease of US$ 237 million (72% decrease) from 2020 to 2024.

 • In Pakistan, the combined WASH budgets of the four provincial governments and the Islamabad Capital Territory increased from 225 billion to 265 billion rupees (US$ 808 million to US$ 952 million) from 2022 to 2024 – an 18% nominal increase. However, due to high inflation over the same period, this represents a 20% decrease in real terms. 

• In Uruguay, the State Sanitary Works experienced a nominal budget decrease from US$ 444 million to US$ 105 million from 2020 to 2024, leading to an overall decrease in WASH budget from US$ 494 million to US$ 157 million. 

While some WASH budgets may be stable or increasing, governments are increasingly limited in their spending by how well budget allocations can be absorbed/utilized by the relevant ministries. Sixty per cent of countries reported using less than 75% of domestic capital commitments for urban and rural drinking-water supply and sanitation (Fig. 6.7). Lengthy and complex procurement processes are most often cited as obstacles in improving the efficient and timely use of domestic capital commitments for WASH. Irregular funding flows and untimely execution of projects are also reported. This GLAAS survey result is consistent with a key finding from a World Bank report that the sector’s budget execution rates average about 72% based on an analysis of public expenditure data from 65 countries in 2019 and 2020 (1).

Cost recovery of O&M expenditure is a key measure of financial sustainability of service providers. It indicates the extent to which the costs of providing WASH services are covered by service provider revenues, which largely consist of tariffs, tax revenue, interest, user fees and other funds. While sources of revenue may vary, countries were requested to solely estimate the sufficiency of tariffs and household contributions to cover O&M expenses. Despite many countries indicating legal frameworks exist and tariff reviews are performed every 1–2 years (with most reviews being performed at least once every 5 years), less than a third of responding countries indicated user tariffs are sufficient to recover at least 80% of O&M costs. Owing to insufficient cost recovery from tariffs and household contributions, most countries use some form of subsidy from the national treasury, local, provincial or state budgets, or other communal services (cross-subsidization) to cover operating deficits. However, these deficits are often not covered in full. Inefficient cost recovery may be the result of several factors, including the lack of political will to raise tariff rates to cost recovery levels and tariff rates set too low to maintain affordability. For example, Panama reported that costs are not fully recovered through tariffs or household contributions, nor are they covered by contributions from other sources, leading to a lack of investment and inadequate O&M of the systems. For urban sanitation (sewerage and treatment), tariffs have not been applied, so the national government subsidizes this service through the Panama Sanitation Programme and the National Institute of Aqueducts and Sewers (a 100% subsidy on sanitation). Similar cost recovery issues are seen for urban drinking-water, with rates not updated for 30 years and where resources are insufficient. Another factor potentially leading to low levels of cost recovery includes high NRW that is not accounted for in tariff reviews. Belize and Myanmar highlighted NRW as problematic to cost recovery, while Jordan and Mongolia reported efforts to reduce NRW to improve cost recovery. In the GLAAS 2024/2025 cycle, 56 countries reported an average of 39% NRW for their three largest water suppliers. Countries cited a wide range of impacts from insufficient cost recovery, including delayed liability payments, delayed maintenance, low workforce investment capacity (for hiring and training), increased response times and delayed household connections. The Democratic Republic of the Congo noted that such operational inefficiency results in increased release of pollutants into the environment, a higher proliferation of disease vectors and ultimately poorer health.

Despite the importance of maintaining service quality, functionality and retaining workforce capacity, trends in cost recovery are decreasing. Cost recovery data from common country respondents in the GLAAS 2021/2022 and 2024/2025 cycles were compared. In all sub-sectors, fewer countries reported being able to recover 80% of O&M costs from tariffs and household contributions in the GLAAS 2024/2025 cycle than in the 2021/2022 cycle (Fig. 6.8).

In the GLAAS 2024/2025 cycle, 55% of countries (58 of 105) reported an estimated aggregate WASH expenditure of US$ 70 billion (for capital and O&M expenses). These 58 countries represent a population of over 2 billion, and an average annual WASH expenditure of US$ 34 per capita, inclusive of public expenditure as well as spending by users (households, commercial and industrial). Total expenditure from all sources comprises an average 0.83% of gross domestic product (GDP) (Fig. 6.9)

Overall trends for WASH expenditure indicate increased spending on WASH from 2018 to 2024. Twenty-four countries (representing 1 billion people) that have consistently reported expenditure data in the GLAAS 2018/2019, 2021/2022 and 2024/2025 cycles show an increased WASH expenditure from US$ 18.5 billion to US$ 26.4 billion (42% increase) from 2018 to 2024, which is an annual average increase in WASH expenditure of 6.7%. When assessing WASH expenditure per capita, trends show that, on average, countries have increased WASH spending to keep pace with increasing population and inflation. Fig. 6.10 highlights the trend in WASH expenditure per capita for all responding countries from the GLAAS 2013/2014 cycle onwards. Assessing all country respondents shows a relatively stable trend of WASH expenditure per capita of US$ 32 to US$ 34 over the GLAAS 2016/2017, 2018/2019, 2021/2022 and 2024/2025 cycles. The 24 countries that provided WASH expenditure data in the GLAAS 2018/2019, 2021/2022 and 2024/2025 cycles show a lower overall WASH expenditure per capita, but do show an increasing trend from US$ 20 to US$ 26 per capita from 2018 to 2024.

Table 6.3 summarizes WASH expenditure data from all responding countries for the past five GLAAS cycles. It shows the extent of how countries are increasingly able to report data on WASH expenditure. Average GDP expenditure among all country respondents varies from 0.72% to 1.02% of GDP, with some of this variation due to differing respondent groups representing a mix of different country income levels.

WASH expenditure varies by country income group, with low-income countries spending less per capita on WASH but a greater proportion of their GDP than higher-income countries. While per capita WASH expenditure in four reporting high-income countries averages almost US$ 230 per capita, 13 low- and 22 lower-middle-income countries average US$ 12 and US$ 22 per capita WASH expenditure, respectively. Conversely, average WASH expenditure as a percentage of GDP is higher in low-income countries (1.35%) than in high-income countries (0.50%) (Fig. 6.11).

The main sources of funding for WASH are: user tariffs and fees contributed by users of WASH services (which also include the value of labour and material investments of households managing their own WASH); domestic taxes that are channelled through central, state and local governments, and which are used to fund or subsidize WASH services; grants from international donors and NGOs; and loans, which may be concessional in nature (having a grant element that may be derived from favourable lending terms and/ or time frames) or non-concessional from international development banks or private institutions. While loan disbursements may be a contributing source of funding WASH in a particular fiscal year, ultimately, loan and interest payments are borne by users or recipient governments.

 In the GLAAS 2024/2025 country survey, 40 countries, representing 1.75 billion people, provided data on their overall WASH expenditure (inclusive of capital, O&M expenditure and debt financing) by all funding sources: users (including household, commercial and industrial users, through tariffs and out-of-pocket expenditure), governments (at central, regional and local levels), grants and donations (from donors, NGOs and other organizations) and repayable financing.22 The total annual WASH expenditure in those 40 countries was US$ 60.4 billion, with an average annual per capita expenditure of US$ 35, of which users pay 50%. In addition, in future years, through taxes and user charges, users will be the source for the repayment of loans, which comprised 14% of funding sources (Fig. 6.13).

Data from the GLAAS 2016/2017, 2018/2019, 2021/2022 and 2024/2025 cycles indicate that a majority of WASH expenditure is made by users. Funding classified as grants from bilateral donors, multilateral donors and NGOs comprises less than 4% of overall WASH funding, although some concessional lending will have a grant element. Expenditure data also indicate that funding from repayable financing increased from 8% to 14% of WASH funding flows from 2021 to 2024, for all country survey respondents (Table 6.4),23 as well as for 16 common country respondents that provided detailed expenditure data in the GLAAS 2018/2019, 2021/2022 and 2024/2025 cycles.