A new EDB study provides an in-depth analysis of the current state of drinking water supply and sanitation infrastructure in Central Asia. It estimates the amount of investment needed to meet the SDGs by 2030 and formulates a comprehensive approach to provide safe drinking water and access to sanitation. Almost 10 million people in the region do not have access to safe drinking water. From 1994 to 2020, the volume of water withdrawal for municipal and domestic needs increased by 100%. However, investments in drinking water supply infrastructure were inadequate to this growth. To meet the challenges in 2025-2030, the sector needs an additional $2 billion of investment annually.
Water security in many regions of the world is currently under threat. According to the UN, about 2 billion people have no access to safe drinking water, and 3.6 billion people have no access to safe sanitation. Over 40% of people in the world live in regions afflicted with a critical shortage of water. More than 80% of domestic wastewater in developing countries is dumped into rivers and seas without preliminary treatment. Water pollution undermines global water supply security. It is projected that by 2025 about 33% of the world’s river sub-basins will be affected by water scarcity caused primarily by water pollution and the confluence of hydrologic and climatic factors.
In Central Asia (‘CA’), the challenges of access to and treatment of drinking water are even more acute, with 10 million people, or 14% of the population, having no access to safe drinking water. Water withdrawals for drinking and domestic uses increased twofold to reach 8.6 km3 between 1994 and 2020, while investments in drinking water supply infrastructure failed to match that consumption growth. As a result, water and sanitation equipment wear and tear is extremely high, reaching 80% in CA according to some estimates. Physical and commercial water losses in distribution networks can be as high as 55%. In all CA countries, the poor state of repair of water and sanitation infrastructure facilities impedes their proper operation, making it more difficult to produce high-quality drinking water. The scope of financial support for water and sanitation sector development plans and programmes adopted in CA is clearly insufficient to ensure the achievement of SDG 6 by 2030. A comparison of planned (anticipated) and projected 2025–2030 financing commitments leads to the conclusion that the region is facing a deficit of more than $12 billion over the period, or about $2 billion per year. The largest financing shortfall among the countries of the region is expected to occur in Uzbekistan: $826 million per year, or almost $5 billion in 2025–2030. A large financing shortfall is also projected for Kazakhstan at $700 million per year, or $4.2 billion in 2025–2030. In Tajikistan, the financing shortfall will also be significant given the size of the country’s economy, reaching $209 million per year, or more than $1.2 billion in 2025–2030.
The CA countries are facing a major challenge: they need to raise financing for their water and sanitation sector. Among the numerous solutions described in the paper, three could help to raise the required investment capital.
First, the funding gap can be reduced by actively attracting financing from international financial organisations, multilateral development banks, development agencies, etc. (“IFIs”). These institutions wield a significant potential for the financing of the water and sanitation sector in CA. At this time, the sector accounts for only 6% of total IFI-approved sovereign funding provided to the CA countries, with 147 projects valued at $4 billion (out of a total of $67.5 billion) completed in 2008–2023. However, as the sector’s investment appeal improves, IFIs may resolve to become more actively involved in its financing. The potential of the corporate financing segment can also become significant with the emergence of a new favourable institutional environment and the arrival of private players.
Second, the CA water and sanitation sector needs private investments and large players. To attract them, it will be necessary not only to modify the ownership and governance structure, but also to create conditions conducive to effective development of market relations in that area. The strengthening of public-private partnership institutions can be of great help. With PPPs active in the water sector, state and private structures will be able to cooperate in a more productive fashion. Expansion of the water sector services market will boost competitiveness and improve the operating efficiency of individual companies. Further, the presence of strong PPP institutions is likely to encourage private operators to join water sector projects. The advent of private players will help the CA countries to attract investments and gain access to innovations, technologies, and experience required to modernise the sector.
Third, the case to improve the tariff system is becoming increasingly compelling. With current water tariffs in the region being extremely low, the CA countries can partially hike them to improve the financial sustainability of water and sanitation companies. This will stimulate investments in the development of infrastructure and improve the quality of services. The CA countries can also delegate their tariff approval and review functions to the companies operating in the sector, with control functions vested in local government bodies or independent regulatory bodies. International best practices indicate that it is important for water and sanitation companies to retain state support in the form of subsidies and soft loans, as well as to preserve targeted subsidies for low-income and socially disadvantaged groups of the population.
The implementation of investment projects in the water and sanitation sector can have a significant economic impact. These projects are vital for public health, education, and social well-being. Investments in drinking water supply and treatment infrastructure produce a considerable multiplier effect for the economy. Each dollar invested in CA projects designed to upgrade that infrastructure will, on average, generate three additional dollars.
The proposed financial solutions must be accompanied by institutional and technical measures. Such measures, as a whole, constitute a major component of the integrated approach formulated in the EDB paper.
The full version of the report Drinking Water Supply and Sanitation in Central Asia is available at the EDB website.
