Water bills set to rise on World Bank loan terms

Water bills are set to increase in the wake of pressure from the World Bank for new conservation levies and increased regulatory charges for water companies.

The multilateral financier reckons that Kenyan water service providers should cover 70 percent of the Water Resource Authority’s (WRA) budget from the current 30 percent.

Introduction of fresh water conservation levies will see the service providers pass the additional costs to homes and businesses for piped water and sewerage.

“To enhance access to water and sanitation services, and improve the management and conservation of water resources… implements new water abstraction charges and water conservation levies,” the World Bank said.

Abstraction charges are what the licensed water providers pay the WRA for accessing the commodity from natural sources like rivers.

“The current water abstraction charges do not provide adequate economic incentives for water conservation, nor generate enough financial resources to enable WRA to perform its regulatory functions,” the World Bank said.

The World Bank’s push for higher water levies was revealed in an advisory to the government after it approved a new loan for Kenya valued at Sh80 billion to help the country continue responding to the Covid-19 pandemic and address its debt vulnerabilities.

“The proposed changes affect companies that harvest raw water from rivers. The water companies will call for an increase from the regulator to reflect the higher cost of obtaining the water,” said a top executive at the Water Services Regulatory Board (WSRB), which approves new tariffs.

The board reckons that a number of water firms, including Nairobi City Water and Sewerage Company (NCWSC), are due for tariff review.

The service providers have been campaigning for the review of tariffs that were last revised more than five years ago in order to cover the ballooning costs of operation and maintenance.

Under the new tariff guidelines, each service provider is expected to recover its full cost of providing services in the medium- to long-term and leave a surplus to allow them improve infrastructure.

Currently Kenyans pay an average of Sh93 per cubic metre or 1,000 litres for water piped to homes.

The planned tariff adjustment will force water consumers to dig deeper into their pockets, a painful blow coming at a time when the cost of living has risen to unprecedented levels.

The combined impact of high water tariffs and costly petrol and cooking gas is expected to pile inflationary pressure in an economy where households have knocked off some goods and services from their budgets to navigate the turbulent times.

Kenyans on social media have recently raised concern over reduced cash flow, fewer employment opportunities and mounting public debt, which triggered a petition to the International Monetary Fund (IMF) to stop giving the country more loans.

The World Bank says the additional costs are necessary to meet the costs of conservation for water catchment areas.

The multilateral lenders, including the IMF, are expected to play a bigger role in shaping policy that would require the government to implement tough conditions across many sectors.

The IMF and World Bank advisories come on the back of their multi-billion shilling loan facilities to Kenya where money flows straight into the budget to top up the public purse.

Under the administration of former President Mwai Kibaki, Kenya kept away from this type of credit, with most of the support from institutions like the IMF and the World Bank coming in the form of project support.

Kenya has recently faced a deteriorating cash-flow situation, marked by falling revenues, worsening debt service obligations, and the effects of the Covid-19 pandemic.

The Treasury also came under pressure from the IMF to double the value added tax (VAT) on all petroleum products in an effort to cut budget deficit and tame public borrowing.

More recently, soaring demand for water and poor weather have led to shortages in most towns.