Peru improves efficiency of water and sanitation providers with support from IDB

Peru will improve the efficiency, equity, sustainability, and environmental conditions of water and sanitation service delivery through a reform program supported by the Inter-American Development Bank.

As part of its overall strategy to expand access to water and sanitation services, the Peruvian government plans to improve planning instruments in this sector, and to establish a long-term financing and budgeting mechanism for water and sanitation investments.

Peru also intends to strengthen the regulatory system, improve the governance and transparency of water service providers, and enhance the management capacities and performance of service provider personnel. Finally, the government plans to enhance the environmental sustainability of sector management, consistent with its broader environmental and water resource policies and regulations.

The activities are among measures Peru has agreed to carry out under a $50 million programmatic policy-based loan (PBL) approved by the IDB Board of Executive Directors for the Second-Generation Sanitation Sector Reform Program I.

A key part of the reform program will be the implementation of a more equitable system for determining water and sanitation tariffs in relation to income. Under the planned reforms, low-income households will have access to an allotment that will enable them to maintain proper hygiene at a price they can afford and are willing to pay. Households with the ability to pay will stop receiving subsidies, thereby generating an additional $150 million in annual revenues for 50 utilities regulated by the Superintendencia Nacional de Servicios de Saneamiento (SUNASS, Peru’s water and sanitation agency).

The government anticipates that these additional revenues will enable the utilities to install 50,000 new water connections, benefitting up to 250,000 people. By enabling utilities to allocate resources based on objective criteria, the reforms will help them become financially self-sustaining and more capable of investing in infrastructure and maintenance.

The $50 million IDB loan is for a 20-year term, with a five-year grace period and an interest rate based on LIBOR.

More Information:
Carmiña Moreno
IDB Team Leader
carminam@iadb.org

IDB - Public Information Service
pic@iadb.org