IMF Wants to Raise Water Rates

The International Monetary Fund issued a discussion note recently that governments should be charging consumers more for water. The Fund argues that paying more will lead to sustainable water use and improve access for the poor, The Wall Street Journal reported.

The IMF typically steers clear of issues managed by the World Bank, its sister institution. But the world’s emergency lender said it is getting involved because water challenges affect economic growth and public finances, especially amid shortages. The Fund, its economists suggest, “can and should play a helpful role in ensuring that macroeconomic policies are conducive to sound water management.”

The Fund said it can help governments get the incentives right, including “replacing perverse energy and water subsidies with targeted social support.”

That means charging higher prices for water use and using the revenue to improve water supplies and sanitation for the poor, The Journal reported.

The IMF estimates that of the half-trillion dollars a year governments provide in water subsidies, high-earners disproportionately benefit.

The Fund says many countries treat water as though there were no limits to its supply, and underpricing depletes resources and fosters shortages.

“Mismanagement of water—especially the price set on its use—is usually a driving factor,” the economists said. “Water pricing reforms are essential to rationalize demand, improve delivery of services and unlock additional water supply.” S