WATERSECURITYFINANCINGREPORT20241

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?2025InternationalBankforReconstructionandDevelopment/TheWorldBankSomerightsreserved

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Contents

Abbreviationsiv

Summary1

Introduction2

CurrentStateoftheGlobalWaterSector6

WaterSupplyandSanitation7

WaterforAgriculture7

WaterResourcesManagement8

Investment,Financing,andBudgetExecution9

Policy,Institutions,andRegulation10

MDBInvestmentsintheWaterSectorApprovedin202412

FutureReporting16

CollaborationtoDate17

CoordinationMeetings17

ExamplesofCollaboration17

Appendix:

ProfilesoftheMultilateralDevelopmentBanks24

AfricanDevelopmentBankGroup(AfDB)25

AsianDevelopmentBank(ADB)27

AsianInfrastructureInvestmentBank(AIIB)29

CouncilofEuropeDevelopmentBank(CEB)30

EuropeanBankforReconstructionandDevelopment(EBRD)31

EuropeanInvestmentBank(EIB)33

Inter-AmericanDevelopmentBankGroup(IDB)35

IslamicDevelopmentBank(IsDB)36

NewDevelopmentBank(NDB)38

WorldBankGroup(WBG)39

References41

Abbreviations

AfDBAfricanDevelopmentBankGroup

ADBAsianDevelopmentBank

AIIBAsianInfrastructureInvestmentBank

CEBCouncilofEuropeDevelopmentBank

EBRDEuropeanBankforReconstructionandDevelopmentEIBEuropeanInvestmentBank

IBRDInternationalBankforReconstructionandDevelopment

ICSIInternationalCentreforSettlementofInvestmentDisputesIDAInternationalDevelopmentAssociation

IDBInter-AmericanDevelopmentBankGroup

IFCInternationalFinanceCorporation

IsDBIslamicDevelopmentBank

MIGAMultilateralInvestmentGuaranteeAgency

NDBNewDevelopmentBank

WBGWorldBankGroup

DollarfiguresareU.S.dollarsunlessotherwisenoted.

Summary

Theworld’s10multilateraldevelopmentbanks(MDBs)arecommittedtojointactiontoimproveglobal

watersecurityby2030.TheWaterSecurityFinancingReport2024isthefirstannualreporttomonitorthisjointcommitment.The2024reportprovidesabaselineforsubsequentyearsasconditionsevolveandtheglobalfocusonwatersecurityforhumandevelopment,jobsandprosperityincreases.Thisreportfocusesonwatersectorfinancingandactionsunderwaytoachievejointaction.Futurereportswillincludethe

impactandeffectivenessofthisfinancing,aswellasthenecessarypolicies,institutions,andregulationsneededtoachievelastingwatersecurity.

1

Introduction

OnDecember3,2024,ninemultilateraldevelopmentbanks(MDBs)issuedajointcommitmenttowatersecurityattheOneWaterSummitinRiyadh,SaudiArabia(ADBetal.2024).ThiscommitmentbuiltonapreviousstatementatCOP28(ADBetal.2023).

COMMITMENTBYTHEMULTILATERALDEVELOPMENTBANKSTOWATERSECURITY

JointStatementbytheMultilateralDevelopmentBanks(AfricanDevelopmentBankGroup,AsianDevelopmentBank,AsianInfrastructureInvestmentBank,EuropeanBankforReconstruction

andDevelopment,EuropeanInvestmentBank,Inter-AmericanDevelopmentBankGroup,IslamicDevelopmentBank,NewDevelopmentBank,andWorldBankGroup)

WaterisakeypriorityoftheMultilateralDevelopmentBanks;inthelastfiveyearswejointly

committedUSD50billionoflendingtothewatersector,complementedbytechnicalassistance,benefittingmorethan400millionpeopleglobally.

AtCOP28inDecember2023,theIslamicDevelopmentBankdeliveredajointstatementonbehalfoftheMultilateralDevelopmentBankscommittingtoincreasethenumberofpeoplebenefitingfromsupportforclimate-resilientwatersystems,particularlyinwater-stressed

regions.Buildingonthatcommitmentandouron-goingcollaboration,wecommittowork

togethertojointlysignificantlyincreaseoursupporttothewatersectorinthefiveyearsbetween2025and2030,bothintermsoffinancingandtechnicalassistance.InordertodeliverontheSustainableDevelopmentGoals,weaspiretoaccelerateuniversalaccesstosafedrinkingwaterandsanitation,scaleupirrigationtoincreasefoodsecurityandimprovelivelihoods,enhancefloodmanagement,andadvancethesustainablemanagementofwaterresources.Weaimtoprovidehundredsofmillionsmorepeoplewithwatersecuritythrough

3

4

WATERSECURITYFINANCINGREPORT2024

ambitiousprogramsthattakeadvantageofbothdeepercollaborationbetweenus,andcollaborationwithotherpartners.

Together,wecommittoscaleupfinanceforclimate-resilientwater,usingarangeof

financialinstruments.Wewillexplorenewandinnovativefinancingthatcrowdsinprivateandphilanthropicresources.Wewillengagewithmarket-basedmechanismsandassistclientsto

taprelevantclimatefinance.Wewillworktogethertopreservescarcepublicfinancingforwhereitisneededmost,prioritizingandleveragingprivatesectorparticipationandscalingupprivate-sectorfinancingandtofacilitateguaranteesandrisk-sharinginstruments.Wewillendeavortoensureno-oneisleftbehind,prioritizingthemostvulnerablepopulations.

Inordertoachievesustainabilityandgreaterimpact,webelievethewatersectorneedsboth

technicallyandfinanciallyefficientserviceprovidersthatcandeliverqualityservices,and

soundgovernancearrangements,includingpolicy,institutionalandregulatoryregimes,thatareimplementedwithintegrity.Accordingly,attherequestofourclientcountries,wewillsupport

watersectorreformsandinvestmentsatcountryandregionallevelandwillhelpbuildutilitiesthatcanfacethefutureinachangingclimate.Wewillseektoimprovetheefficiencyandfinancial

sustainabilityofserviceprovidersandaffordabilityforusers;tobuildeffectivepolicy,

institutional,andregulatoryenvironments;andtoenhancegovernanceandtransparencyinthesector.Wewillpromotenature-basedsolutionsandinnovativetechnicalsolutionstoenhancewatersecurity.

Wewillworktoimproveourcollaborationandcoordination,inlinewithourdifferentmandatesandbusinessmodels,developingournetwork,consultingwitheachotherandbuildingour

partnershipatglobal,regionalandcountrylevel.Respondingtotheneedsofourclientcountries,wewillseekoutopportunitiesforco-financing.Wewillworkwithintheexistingcoordination

processesamongMDBstoprovidemoreefficientandcoordinatedsupporttoourclients.We

committostreamlineprojectexecutionandimplementationandreducecomplexityfor

borrowers.Therearemanyopportunitiesforustocoordinatetheassistanceweprovideand

collaboratetobringclientsanoptimizedpackageofsupport.Wewillseekoutwaystoscaleupourtechnicalassistanceandtoworktogethertoensureitisfocusedonthemajorobstacleswehavejointlyidentifiedthatimpedeprogressinthewatersector.Wecommittosharing

knowledgeandtools.

Wewillmonitorandreportonoursuccess.Thiswillincludebothprogressinreachingourcommitmentstoscaleupfinancing,andrealizationofourpromisetoworkcollaboratively.

FINANCINGREPORT5

Inthisstatement,theMDBscommittedtoreportingonjointprogress.1ThisfirstannualWaterSecurity

FinancingReportprovidesanoverviewofMDBinvestmentsinthewatersectoraroundtheworld,

providingabaselinein2024againstwhichfuturefinancingcanbetracked.Ithighlightsthecollectiveeffortofthe10membersoftheMDBWaterSectorCoordinationGroup—theAfricanDevelopmentBankGroup(AfDB),AsianDevelopmentBank(ADB),AsianInfrastructureInvestmentBank(AIIB),CouncilofEurope

DevelopmentBank(CEB),EuropeanBankforReconstructionandDevelopment(EBRD),European

InvestmentBank(EIB),Inter-AmericanDevelopmentBankGroup(IDB),IslamicDevelopmentBank(IsDB),NewDevelopmentBank(NDB),andWorldBankGroup(WBG)—tofostercollaboration,shareknowledge,andcatalyzeinnovativesolutions.Thisgroupdefinesinvestmentsinthe“watersector”asinvestments

inthreesubsectors:(1)watersupplyandsanitation,(2)waterforagriculture(irrigation),and(3)waterresourcesmanagement(includingfloodriskmanagement).

1TheCEB,whilenotpartytotheinitialMDBjointstatement,isparticipatinginthereportingprocessandcollaborativeMDBeffort.

CurrentStateoftheGlobalWaterSector

WaterSupplyandSanitation

In2022,2.2billionpeoplelackedaccesstosafelymanageddrinkingwaterservices,and3.5billionpeople

lackedaccesstosafelymanagedsanitationservices,withthebiggestgapsinSub-SaharanAfrica,partsof

SouthAsia,EastAsiaandthePacificIslands,andLatinAmericaandtheCaribbean(WHO-UNICEFJoint

MonitoringProgramme2023).Estimatesindicatesignificanturban-ruralinequalities.In2022,81percentof

urbandwellersusedsafelymanagedwaterservices,whileonly62percentofruraldwellersdid.Therewas

asimilargapintermsofsanitationservices:65percentofurbandwellersusedsafelymanagedsanitation

in2022,comparedwith46percentofruraldwellers(WHO-UNICEFJointMonitoringProgramme2023).

Littleprogresshasbeenmadeinclosingtherural-urbanaccessgapinlow-incomecountriesoverthepast

twodecades(ZhangandBorja-Vega2024).The1.9billionpeoplelivinginfragilecontextsweretwiceas

likelytolacksafelymanageddrinkingwaterandbasichygieneandoneandahalftimesaslikelytolack

safelymanagedsanitationservices(WHO-UNICEFJointMonitoringProgramme2023).

WaterforAgriculture

Overthepast60years,theglobalareaequippedforirrigationhasmorethandoubledfrom161million

hectaresin1961to354millionhectaresin2022.2Butirrigationexpansionhasnotbeenuniform.Although

irrigationisfoundinalmosteverycountryintheworld,themajorityishighlyconcentratedinjustafewareas,

includingtheIndo-GangeticplainsofSouthAsia,theNorthChinaPlain,themajorriverdeltasofSoutheast

Asia,andpartsoftheUnitedStates.Incontrast,Africahasminimalirrigationoutsideofafewcountries,

and,intotal,only6percentoffarmlandinAfricaisirrigated(ZhangandBorja-Vega2024).Agricultureisa

2FoodandAgricultureOrganizationoftheUnitedNations.FAOSTAT.

/faostat/en/#data/RL

.

7

8WATERSECURITYFINANCINGREPORT2024

majoremploymentsector,accountingfor27percentofglobalemploymentin2021,withsignificantregionaldifferences.InEurope,agricultureemployedonly5percentoftheworkforcewhileinAfricaandAsiait

accountedfornearly50percentand30percentoftheworkforce,respectively(FAO2021).

WaterResourcesManagement

Some4billionpeopleareestimatedtoliveinwater-scarceareas,withroughly25percentoftheworld’s

GDPatriskandwater-stressedareasexistingonalmosteverycontinent(Kuma,Saccoccia,andShertock2023).By2040,oneinfourchildrenisexpectedtofaceextremewatershortages,makingwatersecurityanincreasinglypressingchallengeformanycountries(UnitedNations2022).Morethanhalftheglobal

population—some4.5billionpeople—isathighriskofexperiencinganextremeweatherevent,such

asaflood,drought,cyclone,orheatwave(Doanetal.2023).Asclimatechangealtersrainfallpatterns

andintensity,morefrequentandintensedroughtsandfloodsthreatenthequantityandqualityofwater

sources,damaginginfrastructureandjeopardizingtheprovisionofbasicservices.Droughtsandfloodswilljeopardizeagriculture,leadingtofoodinsecurity,andwillunderminelivelihoodsinthepoorestcountries.

Manylargecitiesbearseriousrisksandfacetheneedformassiveinvestmentinthewatersectortoguaranteeresilienceinthefaceofthetwinpressuresofgrowingwaterdemandandclimatechange.

Cooperationtooptimizewaterresourcemanagementanddevelopmentislacking,andfragmentation

hamperswatersecurity;276transboundarybasins,accountingfor60percentofglobalfreshwaterflow,aresharedby148countries(UNWater2008).

WATERSECURITYFINANCINGREPORT20249

Investment,Financing,andBudgetExecution

Usingavailabledataontheinvestmentneedsinthewatersupplyandsanitationsubsector,a2024WorldBankstudy(Josephetal.2024)revealedsignificantshortfallsinspendingwithrespecttotherequired

levelsofinvestmenttoreachSustainableDevelopmentGoaltargets6.1(achieveaccesstosafeand

affordabledrinkingwater)and6.2(achieveaccesstosanitationandhygieneandendopendefecation).3Theestimatedannualspendinggapbetween2017and2030rangesfrom$131.4billionto$140.8billion,

withamiddleestimateof$138.0billion.Onaverage,countrieswillneedtoincreaseannualspendingto

between2.7and3.0timesthecurrentleveltobridgethisgap.ThelargestspendinggapisfoundinSub-

SaharanAfrica;theannualspendinggapinthatregionisestimatedtobebetween$69.9billionand$73.5billion.Tobridgethisgap,currentannualspendingwouldneedtoincreasetobetween9.5and17.0timesitscurrentlevel.Theinvestmentgapsinlow-incomecountriesandcountriesaffectedbyfragility,conflictandviolenceareevengreater.Low-incomecountrieswouldhavetoscaleupinvestmentbyupto42times,andcountriesaffectedbyfragility,conflict,andviolencewouldhavetoincreasespendingby29times

(Josephetal.2024).

TheWorldBank’sanalysisofirrigationinvestmentgapsindicatesthatthe41countriesstudied,onaverage,arenotspendingenoughtoachieveevenalow-costspendingscenariothatinvolvessubsidizingirrigationinfrastructureonlyandreducingagriculturaldemand(Josephetal.2024).

Thesespendinggapsarelikelytobeunderestimated.Climatechangeeffects—includingwaterstress,waterscarcity,andflood-relatedinfrastructuredamage—areexpectedtoaggravatethecostsof

providingsustainablelevelsofirrigationandwater,sanitation,andhygieneservices.

Spendinginthewatersectoriscapital-intensive,andmaintenancespendingistoolow.Capitalspendingconstitutedalmosttwo-thirdsoftotalpublicspendinginthesector.Maintenancespendinginallthewatersubsectors—watersupplyandsanitation,waterconveyance,andirrigation—hasbeenmodest,despitethefactthatregularmaintenanceiscrucialtosustainingtheutilityandbenefitsofphysicalinfrastructureandprolongingassetlifeandtogeneratingsubstantialsavings(Josephetal.2024).

Despitehugeinvestmentneedsandfundinggaps,thewatersectordoesnotspendallthefunding

allocatedtoit.The2024WorldBankstudyfoundthat,duringthe2009–2020period,countries’

budgetexecutionrateinthewatersectoraveraged72percent,meaningthatabout28percentofall

budgetedfundswentunused.Thisexecutionrateisverylowincomparisontoothersectors.Thehumandevelopmentsectorconsistentlyhasanexecutionrateof99percent;inthetransportsector,itis91

percent,andintheagriculturesector,itis89percent.

3The17SustainableDevelopmentGoalsand169globaltargetsarepartofthe2030AgendaforSustainableDevelopmentagreedunanimouslybyall193memberstatesoftheUnitedNationsGeneralAssemblyinSeptember2015.SustainableDevelopmentGoal6is“Ensureavailabilityandsustainablemanagementofwaterandsanitationforall.”

10WATERSECURITYFINANCINGREPORT2024

Policy,Institutions,andRegulation

Thelowabsorptivecapacityofwatersectorinstitutionsreflectssystemicregulatoryandinstitutional

weaknesses.The2024WorldBank(Josephetal.2024)studyfoundthatfourindicators—governance

effectiveness,regulatoryquality,statelegitimacy,andtheperformanceofpoliticalinstitutions—were

positivelycorrelatedwithwatersectorbudgetexecutionrates.Enhancingthesemeasuresofgovernanceperformancewouldhelpimproveexecutionrates—aswouldaddressingthefragmentationwithinwatersector-relatednationalagencies,havingacoherentwaterpolicy,employinghumancapitaleffectively,

ensuringaccountabilityandtransparencyinthebudgetarysystem,engagingineffectiveprojectplanning,andcreatingasoundinstitutionalandpoliticalenvironment.

Governmentslackcoherentpoliciesthataredesignedtoeliminateinequalitiesinthewatersectorand

reacheveryonewhileensuringsustainabilityandresilience.Manycountrieshavenotinvestedinthe

regulatoryenvironment,andregulatorsoftendonothaveinstitutional,financial,managerialandpolitical

autonomy.Theylacksufficientskills,capacityandfinancialresourcestocarryouttheirfunctions,andtheyareunabletodeterminetheirownadministrativeandoperationalproceduresortomakedecisionsthatareunbiasedandfreefromundueinfluence.Governmentpolicythatsupportsimprovementintheoperationalperformanceofserviceprovidersislacking,asaremanagementmodelsthatensuresustainable,

professionalizedservicedelivery.

WATERSECURITYFINANCINGREPORT202411

Mostwaterserviceprovidersindevelopingcountriesdonotrecovertheiroperationsandmaintenancecosts.Manyalsoneedtoimprovetheiroperationalefficiency;providersthatareunabletocollect

asignificantproportionoftheirallottedtariffsorthathavehighnonrevenuewaterratesareneitherfinanciallyviablenorsustainable.Theystruggletoattractpublicfinance,muchlessprivatefinance.

Thewatersectorhaslaggedbehindothersectorsinleveragingprivatesectorparticipationtoimprove

efficiencyandaccessprivatecapital.Efficiencyinthesectorisalsounderminedbythegrowingskills

gapandchallengesrelatedtoattractingandretainingthediverseskillsrequired.Ifthewatersectoristoattractmorediverseandsustainablefinancing,waterserviceprovidersmustbecomemorecreditworthy,focusingeffortsonincreasingtheirrevenuestreams(improvedbillingandcollection,financially

sustainabletariffandsubsidyregimes),decreasingnonrevenuewater,andoptimizingtheirworkforce.

GuaranteesfromMDBsmaybecontingentonaminimumlevelofcreditworthinessatwaterutilitiesaswellasongovernmentsupport.Itisnecessarytosupportsubnationalgovernmentsandutilities,byscalingupprivatesectorparticipationandtheprovisionofguaranteesandrisk-sharinginstruments,toobtainaccesstonon-sovereignfinancing,therebypreservingpublicsectorfinance.

MDBInvestmentsintheWaterSectorApprovedin2024

Thetotalglobalwatersectorinvestmentsapprovedbythe10MDBsin2024was$19.6billion.Thetotal

investmentapprovedbytheMDBsinlow-income,lower-middle-income,andupper-middle-income

countriesin2024was$14.4billion(

table1

).Ofthistotal,10percentwasdirectedtolow-incomecountries,49percenttolower-middle-incomecountries,and41percenttoupper-middle-