Regional multi-stakeholder consultation on Financing access to basic utilities for all (Lusaka,...
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Transcript of Regional multi-stakeholder consultation on Financing access to basic utilities for all (Lusaka,...
Regional multi-stakeholder consultation on
“Financing access to basic utilities for all”
(Lusaka, Zambia, 23-25 April 2007)
Outcome of the first regional multi-stakeholder consultation on “Financing access to basic utilities
for all”
in Brasilia, Brazil, 11-13 December 2006
Meeting report and background information is available at:
http://www.un.org/esa/ffd
Overview:
I. Mobilizing finance: Stable and predictable financing mechanisms for utility providers at the sub-national level
II. Ensuring sustainable access for the poor through internal revenue generation – electricity
III. Ensuring sustainable access for the poor through internal revenue generation – water and sanitation
IV. Macroeconomic factors to be taken into account
Section I
Mobilizing finance:
Stable and predictable financing mechanisms for utility providers at
the sub-national level
1.1. Sub-national bonded debt
Municipal bonds as financing mechanisms
Few issues in Latin America despite heavy promotion by World Bank, USAID and others (Mexico is exception)
Fiscal Responsibility Laws limit debt of municipalities
Fiscal transfers from central government remain most important source of finance
1.2. The role of financial intermediaries
Some success with pooled financing arrangements through municipal development funds: Colombia: Financial institution “Findeter” South Africa: Infrastructure Finance Corporation Limited
Getting international credit rating is a challenge
Section II
Ensuring sustainable access for the poor through internal revenue generation –
electricity
2.1. Pre-conditions for Successful Sustainable Investment into utilities
Importance of local institutions and local context for sustainable investment into basic utilities
”LUZ PARA TODOS” (LIGHT FOR ALL)-initiative aims to extend electricity to the whole population in Brazil by the year 2008 Supply options: grid extension (urban areas) as well as local
renewable energy systems for more isolated rural areas, such as palm oil, photovoltaic (PV) cells for community and domestic use, and micro and small hydro plants
Section III
Ensuring sustainable access for the poor through internal revenue generation –
water and sanitation
3.1. Raising internal revenue generation through
participatory approachesThe experience of Porto Alegre, Brazil
Attempts to privatize public services in Porto Alegre were rejected; public provision has been successful
Residents of Porto Alegre take part in financial decisions of municipality through a participatory budget process
Financing through: Cross-subsidies from rich to poor households Multilateral loans
The experience of Buenos Aires and surrounding municipalities in Argentina
9,6 million people, 38% below the poverty line
“Social rate for water” is financed through cross-subsidies To identify the target groups for social rates correctly a
social survey was undertaken, assessing data on income, health and consumption related variables
Users of social rate had to take part in the social survey
3.2. Applying cross-subsidies
3.3. Increasing internal revenue generation through
minimizing losses
The experience of Mexico City
Inequitable distribution of water Ineffectiveness of consumption subsidies Problems: 35% of leakages, 50 years old distribution
network, tectonic movements 2001-2006 efficiency-enhancing measures:
822 km of secondary networks (6,7% of the total) were substituted with High Density Polyethylene Collaborative effort between state and central government (“Fideicomiso 1928”) increased the efficiency of the water and sanitation system.
Section IV
Macroeconomic factors to be taken into account
4.1. Appropriate fiscal and monetary policies for public investment
Incompatibility of privatization of public services with poverty eradication and MDGs
Rather than crowding out investment, prudent public spending increases the productive capacity of the economy and can attract private investment
Increased government spending on utilities is necessary but needs to be coordinated with adequate monetary policies.
51
7
68
30
98
51
0
20
40
60
80
100
%
Sub-SaharanAfrica
South Asia Latin America
Urban
Rural
Percentage of the Population with Access to Electricity (IEA 2002)
4.1. Appropriate fiscal and monetary policies for public investment
Tendency of Public Investment 1980-2000
10
7
12
3
0
2
4
6
8
10
12
14
Share of GDP, %
Asia Latin America
1980
2000
4.1. Appropriate fiscal and monetary policies for public investment
Macroeconomic risks
Key risks in financing utilities through international loans:
Maturity mismatches: borrowing from financial markets on a short term for long term infrastructure investments
Interest rate risk: difference in interest rates at the time between borrowing and refinancing
Exchange rate risk: international loans refinancing in foreign currency vs. local currency revenues
PPPs’ off-budget loan guarantees for the investor
THANK YOU!