Water Rates, Subsidies Need Changes to Ensure Safe Supplies

Governments must reform policies on water and utilities should begin charging higher rates to reduce waste and guarantee safe supplies, according to the International Monetary Fund.

Realigning incentives and pricing, and better managing current supplies would benefit millions, the IMF said in a report Monday. Climate change is “likely” to stress global supplies, adding urgency to calls for change, the report found.

“Since water use is expected to continue to rise with population and income growth, and freshwater resources cannot be easily increased, these challenges will only intensify,” Kalpana Kochhar, deputy director of the IMF’s Asia and Pacific Department, said on a conference call Friday.

While millions lack access to clean drinking water, public utilities in many countries continue to underprice the life-sustaining fluid. That creates waste and fails to return enough capital to maintain delivery systems, according to the report. Public utilities provided $456 billion in water subsidies in 2012, and the incentives disproportionately benefited upper-income groups.

“Getting incentives right, notably by reforming water pricing, can help rationalize water use, promote needed investment, and protect the poor,” according to the report.

Water management affects economic stability, growth and poor and vulnerable groups, the IMF said. The group staked out a role in water policy, offering to help find and replace ineffective subsidies with long-term investments in areas including infrastructure.

“Water pricing reforms should be complemented by a policy that rationalizes water use in areas such as agriculture, trade and energy, while achieved gains could be redirected to work affecting the poor,” Kochhar said.

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