If the Philippines were to reach their goal of universal access to water and sanitation within a decade, the government would have to inject additional funding of 21.3 billion pesos to 55.5 billion pesos to local water districts ( LWD).
This was the main finding of the report “An Assessment of Financial Viability and Performance of Philippine River Basin Districts” written by Lawrence Velasco, Assistant Professor at the University of the Philippines Cesar EA Virata School of Business. The study was published by the Philippine Institute for Development Studies (PIDS).
Velasco said the baseline scenario is 21.3 billion pesos between 2019 and 2023. However, assuming a lower maximum allowable debt-to-asset ratio of 60% and 50%, the requirements would reach between 31.9 billion pesos. and 51.6 billion pesos.
“The country’s spending plans are so ambitious that the current balance sheets of LWDs cannot support planned investments through debt financing,” Velasco said.
“These infusion requirements are critical, given the Mandanas decision, in which the allocation of internal LGU revenues will increase by 225.3 billion pesos,” he added.
Velasco explained that based on the Philippines Water Supply and Sanitation Master Plan (PWSSMP) 2019-2030, the National Economic and Development Authority (Neda) said the country should invest 1 069 trillion pesos from 2019 to 2030.
Of that amount, Velasco said, the Local Water Utilities Administration (LWUA) and water districts are to spend 94.17 billion pesos and 87.41 billion pesos on water supply and sanitation, respectively. , from 2019 to 2023.
However, Velasco said most of the water district funding sources are loans. He said the financial burden on LWDs between 2009 and 2018 is already significant.
Borrowing to meet targets means securing loans in the range of 136.4 billion pesos from 2019 to 2023, which Velasco said may not be feasible without a capital injection from the government.
“The available debt capacity of river basin districts nationwide, based on their current financial situation, is estimated at only 43.3 billion pesos from 2019 to 2023, with a maximum debt ratio of 70% . This represents only 31.7% of the investments needed by the water districts to achieve Neda’s 2023 vision for the sector, ”said Velasco.
“To finance the balance of 93.16 billion pesos, the government must inject nearly 28 billion pesos of fresh equity into the river basin districts of the country to finance the balance through debt, assuming a rate of 70 percent debt, “he also said.
Velasco said his estimates were based on aggregate balances from 488 river basin districts. Some of these LWDs, he said, may outperform or underperform the national average, which can increase or decrease the estimated capital requirement.
Therefore, he said, investment plans need to be analyzed by river basin district to ensure that each can reasonably raise and sustain funding.
In September, Neda said the Philippines must invest a total of 1.1 trillion pesos in order to meet the Sustainable Development Goal (SDG) on water supply and sanitation by 2030.
At the launch of the PWSSMP, Neda’s Deputy Secretary for Investment Programming, Roderick M. Planta, said it means an annual investment of over 100 billion pesos between 2020 and 2030.
This amount has never been invested by the country before in the water and sanitation sector, and Planta said this explains the need to provide incentives to other stakeholders in the sector as well.
He said the government spent only 5 billion pesos per year on water supply and sanitation projects and programs, implying a gap of 95 billion pesos each year.
The low investments have led to many problems in the water and sanitation sector. In his speech, the Secretary for Socio-Economic Planning, Karl Kendrick T. Chua, said that only about 44% of households have an individual connection to an appropriate and fully cross-linked water system.
The remaining 56 percent, or 57 million Filipinos, have to collect water for their families from communal pipes, springs or wells up to 250 meters away.
Only 18% of Filipinos have access to sludge management services, while 13% have access to a sewage system, Chua said. He added that more than 4 million Filipinos still practice open defecation.