Pricing Municipal Water and Wastewater Services in Developing Countries: Are Utilities Making Progress Toward Sustainability?

Abstract

This chapter uses data from the International Benchmarking Network for Water and Sanitation Utilities (IBNET) to assess the progress utilities are making toward financial sustainability while ensuring that the services remain affordable. The analysis finds that many utilities are only recovering operation and maintenance (O&M) costs and fall far short of achieving full financial cost recovery. The level of (O&M) cost recovery has, on average, barely changed between 2006 and 2011. Over the same period, with incomes rising in many parts of the world, water supply and wastewater services have become more affordable. This suggests that many utilities may be able to increase water prices. The analysis also shows that the differences in utilities’ performance between and within countries are large. Better understanding of how the differences in costs affect revenue sufficiency and affordability is needed to improve pricing policies.