El Nino and the IMF force water tariff hikes across the global South

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Source: Global Water Intelligence (GWI)

Domestic water and wastewater tariffs soared in cities across the developing world from 2015 to 2016 as utilities passed on the effects of rising energy costs, reforms to government subsidies and rampant inflation, the latest survey from Global Water Intelligence has found. Tariffs in Northern Europe and Australia meanwhile are finally coming down as efficiency measures bear fruit.

The results of Global Water Intelligence’s 2016 Global Water Tariff Survey, published last month, have revealed the world’s domestic water and wastewater tariffs increased by an average of 3.6% in nominal terms between 1st July 2015 and 2016 to reach $1.98/m3. The average is based on a household usage of 15m3/month measured in 384 cities worldwide. This global rise was outstripped by jumps of 12.7% in Sub-Saharan Africa and 10.3% in Latin America, where utilities were forced to respond to sustained drought conditions as a result of the El Niño climate pattern, and macro-economic upheavals which demanded water rate subsidy cuts.

The survey also revealed that many countries oversaw tariff hikes this year to meet conditions for external investment in their infrastructure. Cities such as Hanoi, Minsk and Astana implemented tariff reforms in order to secure loans from the Asian Development Bank (ADB), the International Monetary Fund (IMF) and the European Bank for Reconstruction and Development (EBRD) respectively. IMF loan requirements were also behind substantial combined tariff increases in Egypt and Jordan, while the reality of low commodity prices saw Saudi Arabia and Iran overhaul their subsidy structures.

Residents of Merida (Venezuela) and Buenos Aires (Argentina) wrestled with the largest combined water and wastewater tariff increases in 2016, with prices rising by 326% and 217% respectively as both cities sought to offset currency devaluation at the same time as raising funds for long-overdue investment. Meanwhile in Southern Africa shortages of water and existing financial problems at utilities were compounded by a surge in electricity prices as El Niño-driven droughts hit hydropower production. The two largest increases in the combined tariff in Africa were in Nairobi (Kenya) and  Accra (Ghana) where the fiscally embattled utilities sought to balance their books with price jumps of 68% and 182% respectively. The average combined tariff in the 24 cities GWI covers in sub-Saharan Africa is now $0.91/m3, while remaining at just $0.13/m3 in South Asia.

However, this year also saw some of the world’s most advanced utilities in Denmark, Norway and the Netherlands cut their tariffs as efficiencies were passed onto consumers. These cuts resulted in Western Europe’s tariff growth slowing to a rate of 1.4% - the lowest recorded since GWI’s Global Water Tariff Survey began. 

Christopher Gasson, publisher at Global Water Intelligence commented “in Northern Europe and we are seeing utilities cut tariffs after heavy investment. We haven’t really seen this before but this should be a normal thing in the water sector; spending on operational improvements which bring down prices in the long term”.

The slowing growth in Western Europe allowed North America, where tariffs rose on account of rising awareness to domestic water issues, to finally catch up when it comes to consumer water prices. The average North American city now charges a combined tariff per cubic metre within $0.20 of its Western European counterpart.

The GWI Water Tariff Survey includes data from over 380 cities and is published annually by Global Water Intelligence. The complete results of the 2016 GWI Water Tariff survey are available to all Global Water Intelligence Magazine subscribers who can download it from www.globalwaterintel.com.

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