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‘A mere 6% of subsidies reach the poorest quintile’

All of us involved in urban water supply and sanitation to the growing cities should be reading this:

‘In the 10 countries we analyzed, an average of 56 percent of subsidies reach the wealthiest quintile of a country’s population, while a mere 6 percent reach the poorest quintile’.

‘Despite their prevalence, there is an emerging consensus among policy researchers that IBTs are not an effective means of targeting subsidies to poor households. This inefficacy is the result of three main problems. First, in both rural and urban areas within low-income countries, many poor households are not connected to the piped network, therefore rendering them ineligible to receive subsidized water. Second, the correlation between piped water use and income is low (Fuente and Bartram 2018), meaning that subsidies delivered through the lower blocks are poorly targeted. Third, poor households are more likely to share water from their connection with other households, leading them to purchase more water at prices within the higher blocks of the IBTs.’

Moreover, IBTs generally fail to encourage conservation through the higher consumption brackets. This results from the difficulty in understanding complex IBT tariff structures (Nauges and Whittington 2017) and the fact that customers tend to respond to average, not marginal, prices (Ito 2013).’

“Doing More with Less: Smarter Subsidies for Water Supply and Sanitation.” Andres, Luis A., Michael Thibert, Camilo Lombana Cordoba, Alexander V. Danilenko, George Joseph, and Christian Borja-Vega. 2019 World Bank, Washington, DC

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