National policy Dialogue on Finance Strategy for Rural Water Supply and Sanitation Alexander Martusevich, Environment Directorate Env&Globalisation Division EAP Task Force

Structure of presentation Collective efforts to achieve water- related MDGs Present project objectives and previous EAP Task Force work on financing WSS infrastructure in Armenia International institutions involved Steering Committee meeting EAP Task Force

Collective efforts to help achieve water- related MDGs Achieving water-related MDGs in rural areas is a big challenge! Key initiatives: EU WI (led by EC, DG ENV) Millennium Challenge Account (USA) Donors and IFIs The present project in Armenia is undertaken in the framework of the EU WI EECCA component in co-operation with EAP Task Force and UN ECE EAP Task Force

Collective efforts to help achieve water- related MDGs in Armenia The present project inter alia aims to address specific requests from SCWS: help develop a Financing strategy (FS) for rural WSS with water-related MDGs as targets help to set “minimal amount of water supply” standard The project will build upon the previous EAP Task Force work on financing WSS infrastructure in Armenia EAP Task Force

Previous EAP Task Force work Finance strategy (FS) for urban WSS (focusing on urban wastewater collection and treatment): Targets: increase coverage by the sanitation service, provide effective mechanical treatment of collected wastewater Results: feasible scenario to rehabilitate municipal wastewater infrastructure, priority investment identified EAP Task Force

Previous EAP Task Force work - 2 Implementing FS for WSS in Armenia, through: Integrating it into the budgetary process and MTEF (Task 1) Ensuring more effective use of available resources (Task 2) Integrating ATP and WTP into tariff approval procedure (Task 3) Adopting Financial planning tool for water utilities (FPTWU) (Task 4) Extending the FS methodology to rural WSS (Task 5) EAP Task Force

Present project Present project has a broader task: To organise a National Policy Dialogue (NPD) on how to finance achieving water- related MDGs, targets on WSS, and on IWRM Influence the sectoral policy Inter alia it envisages: Developing a FS for rural WSS Costing of priority measures under IWRM Deriving aggregated financial figures for water-related MDGs: total expenditure in and supply of finance, financing gap and a package of policy measures to bridge the gap EAP Task Force

International institutions involved EU WI EECCA component lead by EC (DG ENV), Technical Secretariat (DHI & COWI) EAP Task Force (WSS and financing) UN ECE (IWRM) Donors (US AID and Millennium Challenge Corp., UK DFID, JICA, JIBIC) IFIs (WB, KfW, EBRD, ADB) EU WI Finance Working Group, etc. In 2007 the NPD in Armenia will focus on WSS and related financial issues Eventual report on progress at the EfE conference in Belgrade (Oct. 2007) EAP Task Force

Steering Committee meeting Key objectives: Inform local stakeholders about progress in project implementation Discuss preliminary findings of the baseline scenario Ask the SC for guidance on interpretation of MDG targets, minimal water supply concept, and some key variables of policy scenarios Practical issues and arrangements concerning data collection, next meeting, etc. EAP Task Force

Interpretation of water-related MDGs for rural areas Water supply: Technology (piped systems vs springs, wells, boreholes) and service level (standpipes, yard taps, in-house taps) Amount of water (30-50 lcd; lcd) Sanitation: Improved pit latrines, septic tanks (for flush toilets), simple sewer, sewer and WWTP Level of treatment (mechanical, MB) Settlements where treatment is a must (e.g. otherwise would affect sources of water supply) EAP Task Force

Possible interpretations of the “minimal water supply standard” Technology and Quantity: litres per capita per day from dug wells and/or boreholes with hand pumps no farther than 200 meters from dwellings (relatively cheap decentralized solution) lcd from stand-pipes located no farther than 200 meters from dwellings (relatively cheap centralized solution) up to lcd from yard tap or in-house tap (more expensive centralised solution) Right to water or a Target to be met through joint efforts of the GoA, communities and water users ?  coverage and cost implications EAP Task Force

Scenarios to meet water-related MDGs Options: Least-cost approach Focus on rural areas or on urban areas Geographical focus (highlands, remote areas, etc.) Equal benefits for all settlements Setting appropriate institutional set-up A) Community-based solution: each rural settlement/community organizes and finances water supply relying on its own resources with eventual support from the state. B1) Co-operation of rural settlements/communities with eventual support from the state. B2) same as B1) but on the basis of water users associations. C) extending responsibility of existing professional operators (water utilities) and/or creating new professional operators responsible for water supply systems in rural settlements EAP Task Force

Financial dimension of MDG scenarios Key issues: Prioritising rural or urban water Level of contributions from the public budget (for rural/for urban) How to mobilise more finance while addressing affordability constraints: - effectiveness of the income support system to the poor in rural areas (as well administrated as in cities?); - regional water utilities and unified tariffs (cross- subsidisation of rural population, but also mobilising more finance through introducing user charges and improving collection efficiency) EAP Task Force

Summary of key issues for discussion Guidance from the Steering Committee on: priorities (esp. rural/urban) defining MDG scenario possible public budget support and external assistance (grants/loans) affordability constraints in households and how they can be softened institutional set-up