Overview Water financing gaps in Central Asia are severe, specifically considering the growing populations’ increasing demands as well as the aging infrastructures that are still in operation. As substantial amounts of water get lost in old canal systems and with water systems and consumption not well managed, there are huge demands for investments in the entire water supply chain. A report published by the Central Asia Regional Economic Cooperation (CAREC) Institute provides a comprehensive overview of the water infrastructure financing landscape in Central Asia. Drawing from the 2022 analysis of Central Asia’s water infrastructure, it identifies governance gaps in water financing and suggests prioritizing infrastructure funding. The research highlights that cooperation among sectors is essential for leveraging synergies, reducing costs, and ensuring sustainability. It underscores the state's crucial role as a social regulator in the fair allocation of water resources, while private involvement remains limited due to regulatory challenges and unclear ownership structures. Despite efforts to improve fee collection and infrastructure, financing remains a significant challenge, necessitating targeted actions to prioritize funding for essential infrastructure projects. Financing Challenges and Opportunities KazakhstanKazakhstan’s climate is continental and arid, leading to an uneven distribution of water resources, exacerbated by climate change. The government is working on reforms but challenges—such as lack of data, insufficient monitoring, and fragmented ownership—remain. The country needs investments in water infrastructure, wastewater treatment, and water management systems for agriculture. Public funding, water tariffs, development bank loans, and public-private partnerships (PPPs) are key financing schemes. However, issues like insufficient fiscal allocation and weak cost recovery hinder progress, underscoring the need for new fiscal mechanisms and technologies. Kyrgyz RepublicThe country faces several water supply challenges, including low access, poor service delivery, and financial gaps, with about 40% of the rural population lacking safe drinking water and having limited sanitation infrastructure. The country needs almost $740 million in investments for drinking water supply and sanitation infrastructure in rural areas. To address institutional challenges and investment requirements in infrastructure, effective use of international loans and transparency in sector management are necessary. TajikistanThe country's water infrastructure, primarily from the 1960s, requires modernization for climate resilience. Drinking water supply and sanitation covers only 64% of the population, leaving a significant number dependent on untreated water sources. Financial gaps mainly result from lack of financial resources and low tariffs relative to the cost of water, as well as low collection rates for drinking water supply and sanitation services. It needs substantial funds for the Rogun Hydroelectric Power Station and aging irrigation systems. Financing from international climate funds and private sector investment is essential. TurkmenistanA projected population increase and decreasing water availability can make it difficult to manage water resources. To face such challenge, priority projects involve the rehabilitation of water supply and sewerage networks, upgrading of industrial pollution control technologies, and modernization of irrigation systems. Financial investment in the coming years is expected to amount to around $1 billion in the provinces and $166 million in the capital. The water sector is primarily state-managed and financed, but low tariffs and insufficient private investment hinder its development. The government needs to diversify funding sources and involve private investments to meet the growing demand. UzbekistanThe country faces water scarcity issues that impact both agriculture and domestic water supply, exacerbated by inefficient water usage patterns. A planned program for water supply initiatives and sewage system investments is expected to cost $6.8 million, while the maintenance and replacement of irrigation and drainage infrastructure will require an estimated $23 billion to $31 billion. As overlapping responsibilities and inefficient water pricing lead to underfunding and infrastructure deterioration, a strategic approach to tariff adjustments, targeted subsidies, and investments in modernization is crucial. Recommendations Programs and Projects Kazakhstan: Adopting innovative financing mechanisms, like green bonds and corporate social responsibility funds, can support the implementation of climate-related water projects and community-level initiatives. Kyrgyzstan: Implementing institutional reforms and promoting digital information systems can enhance transparency and efficiency in water management projects. Tajikistan: Modernizing the aging water infrastructure, with a focus on climate resilience, can attract global climate funds and private investments. Turkmenistan: Diversifying funding sources and increasing private sector involvement through PPPs can help expand and maintain water infrastructure. Uzbekistan: Using a strategic approach to tariff reforms and investments in leak repairs and water-saving technologies can optimize resource use and improve sector sustainability. Policies Coordinated planning: Promoting coordinated planning across sectors and countries can enhance regional water management and resource allocation. Regulatory reforms: Addressing regulatory hurdles and clarifying ownership structures can encourage private sector participation. Strengthening financial management practices, implementing consistent government policies, and investing in capacity building are essential steps for improving governance. Climate adaptation: National policies integrating climate adaptation measures into water management plans are essential for long-term sustainability. Promoting a digital information system for water management and establishing economic mechanisms for rational water use are necessary for sustainable sector management. International cooperation: Strengthening international cooperation and adhering to agreements on transboundary water management can mitigate geopolitical challenges. Transboundary cooperation is crucial to manage shared water resources and mitigate climate risks effectively. The CAREC Institute report identifies critical areas for governance improvement and proposes actionable measures to enhance sustainability of the water sector. By addressing these issues through coordinated efforts and innovative financing strategies, Central Asian countries can achieve sustainable water management and security. Resources G. Petersen et al. 2024. Water Sector Financial Governance Gap Analysis in Central Asia. Central Asia Regional Economic Cooperation (CAREC) Institute. G. Petersen et al. 2024. Water Sector Financing Improvement Action Plan for Efficient Water Sector Financing. CAREC Institute. Ask the Experts Georg Petersen International Consultant, Asian Development Bank Dr. Georg Petersen is a water resources engineer with over 20 years of experience in Africa, Asia, Europe, and the Middle East, covering water resources assessments, hydrological studies, climate change, water financing, river basin management, hydraulic modeling, and engineering, as well as dam and irrigation engineering. He has been working on several projects in all Central Asian countries. Follow Georg Petersen on Erkin Madumarov National Consultant for the Kyrgyz Republic, Asian Development Bank Erkin Madumarov is a hydraulic engineer with the more than 30 years of experience in Central Asia. He specializes in water supply, wastewater, irrigation and drainage including site supervision, contract administration, and engineering services. Aiman Uteyeva National Consultant for Kazakhstan, Asian Development Bank Aiman Uteyeva is a water resources expert with over 10 years of experience in analytics and water resources consulting. She has worked with academia and international organizations, such as the Food and Agriculture Organization of the United Nations and the Asian Development Bank. Currently, she is pursuing her PhD in civil and environmental engineering at Imperial College London. Follow Aiman Uteyeva on Bakhrom Gaforzoda National Consultant for Tajikistan, Asian Development Bank Dr. Bakhrom Gaforzoda is a hydraulic engineer who has more than 20 years of experience in the water sector in Tajikistan and Central Asia. He has conducted research in various areas, including water resources management, irrigation and drainage, water economics, and international water law. He has also participated in and led several projects to prepare feasibility studies for the modernization of hydraulic structures. Gulnara Mergenova National Consultant for Turkmenistan, Asian Development Bank Gulnara Mergenova is an analyst of national economic sectors with research focus on energy security, and financing of water, energy and climate fields. With vast experience in data analysis and research, she has been part of various projects of energy, environment and economic development during her service at international organizations. She holds an MSc in International Management and is a member of a climate change, energy, and environment experts network and program. Aziz Karimov National Consultant for Uzbekistan, Asian Development Bank Dr. Aziz Karimov is an applied economist with 16 years of professional experience. He has field experience in Central Asia, Eastern Africa, and Southeast Asia. His expertise lies in agricultural and development economics, including, but not limited to, food and nutrition security assessments, situation analyses of agricultural production, value chain interventions, monitoring and program evaluation, impact assessment, and policy advising. Central Asia Regional Economic Cooperation Institute (CAREC) The Central Asia Regional Economic Cooperation Institute (CAREC) is an intergovernmental organization promoting economic cooperation in Central Asia and along the ancient Silk Road through knowledge generation and sharing. CAREC is jointly shared, owned, and governed by 11 member countries: Afghanistan, Azerbaijan, People’s Republic of China, Georgia, Kazakhstan, Kyrgyz Republic, Mongolia, Pakistan, Tajikistan, Turkmenistan, and Uzbekistan. Leave your question or comment in the section below: View the discussion thread.