Three questions dominate most discussions about the relationship between fiscal policy and water security. The first question relates to how to charge for the provision of water services and ensure that all people can afford access to these services. The second relates to the question of how to minimize the potentially adverse effects of water scarcity on economic progress. The third question focuses on the search for ways to curtail the perverse effects of some fiscal instruments used in other sectors on water security objectives.
This GGKP working paper searches for ways to improve the role of fiscal instruments and approaches in the management of water scarcity and the pursuit of inclusive development objectives. The paper begins by defining fiscal instruments and water scarcity, and then turns to the politically important issue of how to make water services available to all at an affordable price. The paper then considers the role of fiscal policy in managing water scarcity and closes with a broader consideration of the effects of fiscal policies used in other sectors on water use.