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Financing Water for All Gurria Task Force

Financing Water for All Gurria Task Force. Delivering financial engineering and concessionality to local partners New approches from AFD 4th World Water Forum, Mexico City, March 17, 2006 Alexis BONNEL Head, Infrastructure Division Agence Française de Développement.

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Financing Water for All Gurria Task Force

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  1. Financing Water for AllGurria Task Force Delivering financial engineering and concessionality to local partners New approches from AFD 4th World Water Forum, Mexico City, March 17, 2006 Alexis BONNEL Head, Infrastructure Division Agence Française de Développement

  2. ODA = catalyst of water sector financing leverage ODA NGOs Goals Stakeholders Tools Consumer financing • Access to water for all (MDGs) • Sustainability Multiple Stakeholders public, private, civil society foreign, central and local) Multiple Financing Sources FDI Migrant Transfers Local finance Gvt budget

  3. Increase in “good old” ODA financing tools required • Advocating for more ODA funding in the sector • ODA estimated to cover only 15% of funding needs, even after doubling • “Classic” ODA sovereign financing needed to stop erosion of existing infrastructure and cover upfront structural capital investments • Access to water services requires (source OECD): • USD 80 / inhabitant = average in developing countries • USD 260 / inhabitant in Africa : 80% is rehabilitation (lack of self funding capacity, poor management and inadequate consumer financing through payment of services) • More grant financingfor sanitation, so far poorly addressed by aid • Main source of funding = consumer payment for services

  4. ODA has to take more risks • ODA can take more risks in support of local financing solutions • Non and sub sovereign lending • Financial vehicules to support local access to LT capital in local currency (eg. MFI support, local currency bond guarantees, …) • Guarantee and risk mitigation tools • Soft loans to private sector for projects with strong economic/environmental/social impact but deferred financial viability • Output based aid mechanisms • Flexible loans allowing indexation of debt service or concessionality on given indicators (e.g. cash flow)

  5. For that to happen : (1) need to assess & mitigate the risks… • The tariff issue : raise awareness on payment for water services • “Free” water services are not sustainable and expensive, particularly for the poor • No local financing solution without minimal financial viability • The governance issue : building economic confidence • Regulated contractual arrangements improve transparency, governance and performance (eg. case of PPPs) • Improved governance and performance attracts financing, local and foreign • Importance of monitoring : what gets measured gets done

  6. For that to happen : (2) make sure new tools account as ODA • Recognize ODA value of guarantee schemes (partial risk guarantees, guarantees in local currency, etc.)

  7. Thank you ...

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