Public finance for water, sanitation, and hygiene (WASH) services is needed to complement other financing sources and ensure universal access. It can be used to expand services to unserved communities, ensure sustainability by covering maintenance costs, and leverage other funding sources. However, the public finance cycle for WASH needs improvement. Specifically, countries need to better track funding and outputs, prioritize interventions and develop budgets based on strategic planning, mobilize more domestic resources, and improve how funds are spent. Efforts are needed to document best practices, develop tools to improve budgeting and financing mechanisms, and provide support to sector stakeholders.

1. Mari
Mobilising Public Finance for WASH:
Why, for what and how?
Sophie Trémolet, IRC, The Hague, 3rd June 2015

2. Overview
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 Public finance for WASH is needed
 How does it fit in the overall sector financing framework?
 What is it needed for?
 How can the “Public Finance cycle” for WASH improve?
 How can we support water sector stakeholders to
mobilise more funding and spend it effectively?

3. WASH SECTOR FINANCING IN DEVELOPING COUNTRIES
Private funds Public funds
Operating
costs
Maintenance
costs
Investment
costs
(rehabilitation
and new)
COSTS REVENUES
Tariffs
Taxes
Transfers
(ODA)
Financing Gap
What it looks like now
Support costs
Repayable
finance
Operating costs
Maintenance
costs
Investment
costs
(rehabilitation
and new)
COSTS REVENUES
Transfers (ODA)
Financing Gap
Where it needs to go?
Support costs
Tariffs
Taxes
Repayable
finance

4. For what?
 Public finance needs to be spent wisely to complement
rather than substitute for other financing sources
 To ensure universal access to WASH services
 Expand services to the unserved (cover initial capital
investment costs and/or targeted subsidies)
 Ensure sustainability (cover capital maintenance costs
and ongoing direct support costs)
 To leverage other funding sources
 Subsidies to overcome market failures and kick-start
market responses (e.g. development of microfinance)
 Broader investment in the sector: policy, regulation,
training & capacity-building, research, etc.

5. How can we support public finance for WASH?
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A / E - TRACK funding and
outputs:
Better understand what is being
spent and on what?
B- PRIORITIZE interventions and
draw up budgets
C- MOBILIZE funding from
domestic resources
D – IMPROVE how funds are being
used
The whole “Public Finance cycle” for WASH needs improvement

6. Tracking funding and outputs
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 Tracking is entry and end point for the “public finance cycle”
 Current problems
 No consistent tracking of funding into the sector
 In most cases, no attempt to track in a coordinated manner what goes into the
sector (financial inputs, as well as other HR) and what results are
(outputs/outcomes/impacts)
 Where we need to go
 Improve monitoring of financial inputs into the sector
 Develop Value for Money indicators and track them on a consistent basis
 Examples of good practices
 At local level: budget tracking at District Level in pilot Triple-S districts in Ghana
 At national level: reporting on public expenditure on WASH in Brazil
 At national/international level: TrackFin pilot case studies in Brazil, Ghana,
Morocco

7. Prioritising interventions, drawing up budgets
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 Current problems
 Budgets are drawn up based on % increase on previous years with limited forward planning, no
explicit criteria for prioritising interventions
 Political influences result in misallocation of funds
 Certain cost categories (e.g. capManEx, support costs) are not explicitly considered
 Limited considerations of adequate human resources requirements
 Where we need to go
 Budgeting based on strategic financial planning: considering all costs of providing sustainable
services, including adequate provision for staffing for ongoing service and sector management: at
facility / programme / sector levels
 Encourage more cost benefit analysis to decide between alternative interventions
 Examples of good practices
 Triple-S in Ghana/Uganda has supported pilot districts to use costs and service level information
for improved WASH budgeting
 FEASIBLE, a Strategic Financial Planning tool promoted by OECD in Eastern Europe & Africa
 Attempts at international level to estimate costs & benefits of alternative service levels

8. Mobilising funding sources
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 Current problems
 Mismatch between where funding is mobilized (at central level)
and where a high % of WASH funding needs to be spent (at
decentralized level): functional decentralization has seldom been
accompanied with fiscal decentralization
 Inadequate revenue mobilization at the local level
 Very limited use of repayable financing from domestic sources in
the WASH sector in developing countries – whereas has been
extensively used in developed countries
 Where we need to go
 Establish funding mechanisms that can pool funds (from central
government, donors, CSR etc.) and channel them to local level
 Strengthen decentralization and give local governments the
powers to levy taxes / borrow and use proceeds for WASH

9. Good practices at national level
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 Government funding mechanisms to support
decentralisation
 Ghana: District Development Facility – fund transfers based
on local governments’ performance – sanitation is a key
performance indicator, but funds are not ring-fenced for
WASH
 Government transfers to support WASH investments
 Kenya: Water Services Trust Fund
 Zambia: Devolution Trust Fund (funded by GoZ + donors)
 Secured sources for repayable financing of WASH
 Brazil: Fondo de Garantia dos Tempo de Servicio (FGTS) as a
source of repayable finance
 Colombia: FINDETER as a guarantee fund for local government
investment in infrastructure (including water)

10. Good practices at local level
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 Ring-fenced tax revenues for WASH investments
 Sanitation surcharge (Zambia, Burkina Faso)
 Tools to extract value from land: land betterment levies (in
Spain or Colombia), taxes on property developers (e.g.
Morocco), acquisition/ sales of public land
 Municipal borrowing (loans and bonds)
 Widely used in developed countries, China and emerging
markets for green investments
 Rarely used in less-developed countries: many countries
restrict sub-sovereign borrowing, cities are seldom credit-
worthy, mechanisms for guarantees or pooled funding are
under-developed

11. Example: land betterment levies
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 “Betterment”: tax imposed on land-owners based on the
appreciation in property value of infrastructure development –
because of the expected benefits that they will incur
 Betterment levy used in developing countries
 China, Colombia: the city of Bogota financed more than 200
municipal public works, representing over USD 1 billion in
investments, through betterment levies
 Pre-conditions for success
 Land reforms to limit further extension of urbanised informal
settlements and facilitate property taxation: rethinking land titling
and recognising informal ownership
 Overcome taxpayers’ unwillingness to pay the levy
 Legal regime to enforce the tax
 Good public communication on the purposes of the tax
 Transparency and fairness in the use of generated revenues

12. Way forward
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 Sector players can support domestic governments to
improve the “public finance for WASH” cycle:
 Document and disseminate best practices
 Develop and roll-out methodologies and tools to track funding and budget
accordingly
 Assist with the establishment of innovative financing mechanisms (e.g. pooled
funding, guarantee funds) and tools (e.g. land betterment levies)
 Provide seed funding for these mechanisms
 Expertise needed goes beyond the WASH sector
 Financial analysts, fund management specialists, financial “innovators”
 IT specialists
 Funding will be needed for these activities: for specific
programmes at country level, for development of overall systems to benchmark and
track effectiveness of public spending (e.g. TrackFin)

13. Sophie@tremolet.com
www.tremolet.com
www.publicfinanceforwash.com
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