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Increasing allocations towards Water and Sanitation requires more than just increased fiscal space

Neil Cole, Executive Secretary, CABRI and Joana Bento, Program Manager, Building PFM Capability, CABRI
18 Sep 2019

 

While the benefits of water and sanitation investments are well known among sector experts, finance officials are confronted with the realities of governments’ competing priorities and limited budgets. And even though the commitment to safe drinking water and safely managed sanitation is reaffirmed by the Agenda for Sustainable Development, the challenge for many governments to ensure this is realised is immense. Additional investment in the WASH sector will therefore require increasing the fiscal space and finding innovative ways to fund the sector.

For most African countries, increased fiscal space can come from several sources, such as changes in the economic environment that leads to increased revenues, efficiency gains in public spending or even private sector investments. Increased fiscal space, however, does not automatically lead to increased funding to a sector, even if it is considered to be a priority. An economic case for investments in WASH still has to be made.

There is a general view that the economic case for funding the WASH sector has already been made, even though this may not be reflected in public investments. This may be due to a lack of affordability, as well as several other reasons are associated with how these investments are planned for, budgeted and executed.

Evidence from public expenditure reviews shows that expenditure is heavily biased towards capital expenditure, often constituting more than 80 per cent of the budget. For example, proposed spending plans may contain the capital funding for a water reticulation plant, but not include maintenance costs and other associated recurrent expenditure. Yet, not accounting and budgeting for the operational costs associated with capital projects can lead to unsustainable investments.

In addition to the need for improved coordination of capital and recurrent expenditures, the sector also experiences several common challenges that are present in other sectors. These include:

  • Weak capacity to implement policies where funds flow through functions that are performed at a decentralised level of government. These challenges are especially important in cases where national and local government have concurrent functions that are not always clearly articulated and understood. Governments that have decentralised systems in place should place greater emphasis on co-ordinating the various responsibilities, including revenue mobilisation from surcharges and taxes, and ensure that regular consultations are undertaken with multiple agents;
  • A lack of absorptive capacity of service delivery agents, often related to weak capacity to execute development expenditures. Absorptive capacity is considered to be an easily observed performance criteria and a reason to not increase funding to existing programmes or fund new projects; Weak absorptive capacity is, however, a consequence of underlying capability gaps and governments should clearly identify where those gaps lie – whether as a result of gaps in technical skills in procurement processes, contract management and oversight, costing, etc;
  • No clear funding strategy that sets out how costs should be covered and from which sources. The WASH sector is presented with several opportunities for alternate ways to the more traditional forms of procurement, such as Public Private Partnerships (PPPs), which can range from relatively small investments to much larger ones.
  • A lack of co-ordination within the WASH sectors is another significant challenge. Less than 20 per cent of African countries place water and sanitation responsibilities wholly under the same ministry – examples are Ghana, Mozambique, Zambia, Uganda and, until recently, Madagascar. Having water and sanitation under one ministry can help to prioritise WASH, however, some countries with a more fragmented structure have been effective at improving investments in WASH by establishing efficient co-ordination mechanisms. Co-ordination and clear roles and responsibilities are vital, irrespective of the choice of institutional structure.
  • Insufficient focus on performance (i.e. linking expenditure to outputs/outcomes), partly because ministries of finance have a different conceptual framework for performance than that of sector line ministries. For instances, finance ministries are concerned with fiscal discipline and allocative efficiency across all sectors, whereas the WASH sector focusses on increased funding to meet operational needs. Both perspectives need to be appreciated.

Tackling these challenges will contribute to improvements in the delivery of existing programmes and budget allocations and will also strengthen the case for increased investment in the WASH sector when the fiscal space is realised.