The Asian Development Bank (ADB) has approved a US$ 16 million for the Water Sector Improvement Program in the Pacific island state of Palau (pop. 20,000). The programme will address regulatory, management, technical and pricing problems that currently result in high non-revenue water losses and undermine cost recovery. It will also help establish the Palau Water and Sewer Corporation, an independent government-owned corporate entity. It is the first loan agreement between ADB and Palau.
The government currently subsidises the bulk of the cost of water and this is placing a heavy burden on its finances. Growing demand from tourism – which accounts for almost half of the country’s GDP – is also putting a strain on water resources, requiring a new strategy to meet an estimated supply gap of around 1.4 million gallons [5.3 million litres] a day by 2020.
The program aims to set benchmark targets for improving bill collections, including cutting non-revenue water losses from current levels of 43% of production to around 25% by fiscal year to September 2015, and progressively increase tariffs to achieve full cost recovery by the same date. Sewerage tariffs will also be introduced for the first time.
So as not to penalize the poor, the first 5,000 gallons [19,000 litres] of water supplied will still be priced below the cost of production to ensure affordability, while the average total household water and sewerage bill will increase by less than 2% of average household income over the 4 years, according to Anthony Gill, Country Specialist for ADB’s Pacific Department.
During the transition to full cost recovery the corporation will post losses, which will be offset by government financial assistance as well as program support to cover the difference between tariff revenue and actual costs. ADB will also provide management and technical skills training to ensure the new agency is professionally managed and operated.
The Ministry of Finance is the executing agency for the program, which is due for completion by September 2014.
Related web site: ADB – Water Sector Improvement Program : Palau (project information document)
Source: ADB, 10 Nov 2010