E A P TASK FORCE

1. E A P TASK FORCE EECCA-wide trends of water utility performance Tatiana Efimova Helsinki, 24-25 May 2007

2. Structure of presentation • State of water infrastructre in EECCA • Impacts on public health and the environment • Current state of financing EECCA water sector • User charges • Public budgets • External finance • Conclusions

3. WSS infrastructure in EECCA is in critical condition • Key trends unchanged since 2005 Yerevan Ministerial • The water supply and sanitation network is extensive, but increasingly deteriorating • The quality of service is decreasing as a result, impacting on public health • Sewerage and wastewater treatment facilities are often the first service items to be shut down resulting in increased environmental impacts • Adverse impacts on public health stagnate at high levels • The most alarming situation of water infrastructure exists in small and medium cities and in rural areas • On the positive side: water consumption and production are decreasing, metering is spreading

4. Source: EAP Task Force Water Utility Performance Indicator Database

5. Source: EAP Task Force Water Utility Performance Indicator Database

6. US 1996 Source: EAP Task Force Water Utility Performance Indicator Database

7. => Medium sized cities are particularly affected(here continuity of service by size of settlement in Moldova) Source: OECD EAP TF /EUWI /Jacobs (2007), Facilitating policy dialogue, and Developing a National Financing Strategy for Urban and Rural Water Supply and Sanitation in Moldova

8. Access of rural population to sustainable, clean drinking water in Kyrgyzstan Source:National Statistical Office of Kyrgyzstan.

9. Health data shows a mixed picture • Some health indicators have been improving (e.g. infant mortality rate) • While others are deteriorating in some countries (e.g. infections with viral hepatitis A) • But all indicators are significantly above EU levels • Anecdotal evidence of out-breaks of water related diseases are numerous • WHO reports that 13,000 children under 14 die every year due to poor water in the ECE region

10. Environmental impacts • Wastewater treatment infrastructure is insufficient and where it exists often out of operation • As a consequence municipal water systems have become the main polluters of surface waters in many EECCA countries • EEA assess most rivers in Ukraine as polluted or highly polluted, a similar situation exists in almost all areas of intensive economic activity in EECCA • This is increasingly affecting the quality of drinking water sources • Both the Caspian and Black Seas are assessed as under severe environmental stress, mainly due to municipal water pollution according to EEA

11. Current state of financing WSS in EECCA • 50-90% of water utility revenue is generated by user charges • The rest mostly comes from public budgets • But these funds are insufficient even to cover operational costs • In some countries utility revenue from tariffs covers less than 20% of operating costs

12. Source: EAP Task Force Water Utility Performance Indicator Database

13. Reasons: • Water tariffs are extremely low • Collection rates of water charges from HH, even though they are improving, are still low (e.g. typically about 60%) • Operation of water utilities is inefficient due to excessive leakage, inadequate technical equipment, and over-staffing • Metering policies, while crucial for more accountability and social policies, are hurting utility revenues • However: improving economic conditions and household income create new opportunities to improve the situation

14. Affordability is a constraint • Tariffs are and will remain the main source of finance for the sector • But even at present, very low water tariffs many people face an affordability problem; as EECCA proceed with reforms this situation is likely to worsen • Mechanisms to protect the poor exist but are frequently insufficiently targeted at those in need

15. Projections for Yerevan, Armenia Distribution of Households by Charges for Water/Wastewater Services as a Percentage Consumer Expenditures (%)

16. Public budgets • Public budgets are the second largest source of finance and will need to continue playing an important role • In many countries, financing from public budgets will need to increase significantly if the MDGs are to be achieved (e.g. in Moldova a fourfold increase to 2% of public expenditure spending is needed) • Governments need to set in place mechanisms that ensure sufficient fiscal transfers to local level actors on a predictable and stable basis

17. External finance is small compared to needsBilateral and multilateral ODA for WSS in EECCA

18. Conclusions • Infrastructure trends remain negative and resulting impacts on public health and the environment at high levels • Reforms in line with Almaty Guiding Principles undertaken, but not producing results, yet • Efforts should focus on local level actors and rural areas • Financing of sector reforms will require significant efforts from users and public budgets and in poorest countries external assistance will be potentially important