In both global and regional contexts, water and sanitation consistently emerge as critical issues, particularly due to the effects of climate change. These challenges are compounded by ongoing and escalating public health risks, including COVID-19 and the rising threat of antimicrobial resistance. Providing these services is not only an obligation to uphold human rights but also offers significant economic returns - each dollar invested in water, sanitation and hygiene could generate up to a $21 return.
Despite the potential, the sector suffers from the interlinked challenges of under-investment and a poor performance record. To meet the UN Sustainable Development targets for water and sanitation, the Inter-American Development Bank (IDB) estimates that the region requires a total investment of $142 billion in water infrastructure, and $230 billion in sanitation infrastructure. Decisions made by finance ministries have a significant impact on the water and sanitation sector, highlighting their critical role in shaping policy outcomes in this area. Therefore, SWA’s Civil Society Constituency presents five recommendations for the Ministers of Finance invited to attend the Latin America and Caribbean Finance Minister’s Meeting on April 19, 2024, in Washington DC. These recommendations are based on inputs from various stakeholders and recent research on financing inequalities for water, sanitation, and hygiene.
- To provide financing for the most marginalized, the Ministers of Finance are called upon to:
a) Establish a pre-determined percentage of GDP for water, sanitation, and hygiene to ensure access to inclusive, reliable, and climate-resilient water and sanitation services, especially for the women, girls, and marginalized segments of the population. An investment of 1.3% of the regional GDP annually until 2030 would allow universalizing access to safely managed drinking water and sanitation, which could generate up to 3.4 million green jobs a year.
b) Recognize and invest in community-based services that can effectively extend and sustain water and sanitation coverage in hard-to-reach locations as a means to reduce the disparities in access between urban and rural areas. This investment should be accompanied by long-term financing support to the communities managing service provision (which is currently voluntarily provided) and should also focus on improving their resilience to climate change.
- To mobilize more funding by improving sector efficiencies, Ministers of Finance in close partnership with Sector Ministers, are called upon to:
a) Close the investment gap in water and sanitation by increasing domestic resource availability and improving sector efficiencies. It is crucial to track the allocation and expenditure of public funds for water, sanitation, and hygiene (WASH), including the assessment of budgets allocated to these services within sectors like education and health. Tools like WASH accounts - an international accounting framework for systematically tracking water, sanitation and hygiene-related spending – can also support this assessment. Regular assessments are essential for identifying weaknesses in the public financial management system and gaps in the capabilities of actors and institutions. This helps to understand the reasons behind the lack of financial flow and to improve the disbursement of funds.
b) Tax the super-rich and multimillion-dollar corporations to increase government’s fiscal capacity. This additional revenue can be used to enhance investment in sectors that address inequality, such as water and sanitation, gender equality and health, and to finance a just transition to a low-carbon economy. According to the IDB, Latin America and the Caribbean is the world’s most unequal region. The top 10% of earners receive 12 times the income of the bottom 10%. To address this disparity, ministers of finance can employ various tax strategies including implementing one-time solidarity wealth taxes, taxing unexpected corporate profits, raising taxes on dividend earnings, and increasing tax rates for the wealthiest 1%, with even steeper rates for multimillionaires and billionaires.
c) Establish robust mechanisms for public disclosure of all information related to financial allocation and utilization of funds in the water and sanitation sector, especially for those left behind. This will ensure all financial contributions (including community and civil society contributions) are accounted for in the local government and national sector reporting process and subsequently feed into sector budgeting processes.
d) Implement tools, aligned with public sector norms for transparency and accountability, which allow public oversight of how investments by the government, private sector and multilateral banks are spent.
e) Ensure that budget processes are inclusive and transparent by creating and strengthening the mechanisms for participation. Marginalized people, especially women and indigenous groups must be included in budget planning processes.
f) Allocate funds in budgets to ensure compliance with legislation that protects the environment, water sources and water recharge areas from deforestation and mining.
- To maximize the benefits from existing funding by better subsidy targeting, the Ministers of Finance are called upon to:
Improve subsidy systems to ensure they don’t support the highest income earners but instead focus on the most marginalized groups. Currently, most piped water and sewage systems benefit from direct or indirect government subsidies for their construction, operation, and maintenance, with only a part of these costs being recouped through tariffs. This means that households with piped water connections, usually in wealthier communities, benefit from subsidies unavailable to households without connections, which are typically in lower incomes neighbourhoods. Therefore, tariffs need to be redesigned to benefit low-income households. While sector ministers and/or regulators are responsible for the design of subsidies, it is the finance ministers who provide the required authorization and budget allocations. Better coordination between ministries on subsidies is essential to ensure that subsidies are better targeted. This is one way to achieve quality and affordability, which are two essential criteria of the human rights to water and sanitation.
- To ensure that innovative financing solutions are implemented with integrity, the Ministers of Finance are called upon to:
a) Invest in climate adaptation and mitigation to ensure resilient water and sanitation services. This will reduce costs and provide green job opportunities in the long term.
b) Establish good governance processes to prevent corruption in climate finance. Without strong integrity and governance standards, climate finance can be diverted from important prevention and adaptation activities and be used for private purposes, leading to catastrophic consequences for vulnerable communities. Finance ministers should review contractual policies to include a percentage of overall project costs for incorporating nature-based and risk mitigation solutions. This will also allow leveraging these investments as collateral and accessing additional funds for projects.
- On safeguarding the interests of the marginalised during times of austerity and debt crisis, the Ministers of Finance are called upon to:
a) Respect the principle of non-retrogression, which means avoiding budget cuts to essential services such as water and sanitation. Ministers of Finance should also ensure that there is enough funding to meet human rights standards of quality, quantity, accessibility, acceptability and affordability.
b) Negotiate responsible borrowing and lending provisions from multilateral, regional, and national development banks, which allow contingencies for climate disasters and pandemics. It is imperative to demand new fair Special Drawing Rights to finance the elimination of inequalities in access to public services in line with UN Agenda 2030 and the Paris Agreement without incurring new debt. Any new debt-creating solutions to address the climate crisis, such as market-based approaches and debt swaps, should be avoided if they do not prioritize the interests of communities.
We call upon finance ministers to work closely with sector ministers and take decisive and practical steps to implement the above recommendations made by civil society and communities. It is crucial to recognize the power of collective action to achieve regional commitments under the Latin American Sanitation Conference (LATINOSAN) and the ambitious, global UN Sustainable Development Agenda. As Brazil is hosting the G20 meeting, it is imperative to enhance collaboration within the region to drive catalytic action and develop investment and financing plans that address inequalities and promote climate resilience for these communities.
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