New Policy Brief on Water Financing in Central Asia: Challenges and Opportunities

Jun 2024; Georg Petersen, CAREC Institute

Due to fragmented governance, low investment and inadequate cost recovery, Central Asia is confronted with significant challenges in water financing. These factors result in water infrastructure degradation which affects water security. CAREC Institute’s newly published policy brief integrates a review of academic literature, the analysis of current policy frameworks and the empirical evaluation of the current situation in Central Asia related to water financing challenges and opportunities.

Challenges to financing the water sector in Central Asia include fragmented water rights, complex regulation, limited investments and underperformance of the water sector. Private sector participation in the water sector remains limited since the existing cost recovery mechanisms are not effective enough. The current model for funding Central Asia’s water infrastructure is based on government budgets.

While there are significant challenges in financing water sector investments in Central Asia, there is a large potential for improvement. Addressing the issues of fragmented governance, complex regulations, poor cost recovery, and low investment will help Central Asia to build a more secure and resilient water future. Through targeted reforms, the region can attract much-needed capital, upgrade infrastructure, and ensure sustainable water management for the benefit of its people and economy.

To improve the situation, it is recommended to follow a multi-faceted approach towards improving Central Asia’s financial engagement in its water resources. This includes regional cooperation, developing regulatory frameworks to allow and encourage private investments and the implementation of cost-recovery models.

In conclusion, while Central Asia faces significant water finance challenges, substantial potential for development exists. Addressing the issues of fragmented governance, unclear water regulations, private investment opportunity, and cost recovery will help Central Asia build a more secure and resilient water sector.

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