New World Bank research shows that governments across the world spend around $320 billion a year on water and sanitation subsidies, excluding China and India, but that funding often doesn't reach those who need it most.
According to a new report, this equates to about half a percent of these countries’ combined GDP. If only low and middle-income economies are considered, that figure rises to between 1.5 and 2 percent.
“That’s over $300 billion of public money which makes up the difference between how much it costs to provide water and sanitation services and the money that comes in from users. These subsidies cover operations expenditures such as staffing costs, maintaining existing infrastructure, and infrastructure rehabilitation and expansion,” reads the report, Doing More with Less - Smarter Subsidies for Water Supply and Sanitation.
Water and sanitation subsidies can consume a substantial amount of a country’s public resources, the report found.
But subsidies frequently end up disproportionately benefitting upper-income groups, leaving poorer families without the support they need.
“That’s because, as currently constituted, existing subsidies are poorly targeted and don’t sufficiently help poor households,” the research found.
On average, across the ten lower and middle-income countries examined, 56 percent of subsidies end up in the pockets of the richest 20 percent and only 6 percent of subsidies find their way to the poorest 20 percent.
“Subsidies can be powerful and progressive tools in delivering water and sanitation when they are designed in smart and targeted ways and implemented effectively,” argues the report.
Subsidies have a vital role to play in this regard. Making water and sanitation affordable for families can prevent needless deaths and transform lives, the World Bank argues.
“Subsidies that are designed in smart and targeted ways and implemented effectively can help achieve access to adequate and equitable water and sanitation, helping people live productive lives and escape the poverty trap,” reads the report.