Towards sustainable urban water services in developing countries: Tariffs based on willingness-to-pay studies

Water supply and sanitation (WASH) service providers in most towns of developing countries, such as Godey Town in Ethiopia, the case study reported in this paper, deliver less than basic services. The costs for meeting the more ambitious WASH targets of the Sustainable Development Goals will be much higher than what has previously been invested in the sector. This study showed that a tariff structure designed using affordability and willingness-to-pay data would provide higher revenues than one solely based on estimated customers’ affordability, or Ethiopian government’s tariff guidelines. As in previous studies in Ethiopia, this study highlights government’s low willingness-to-charge amidst a high customers’ willingness-to-pay. Yet, there is need to increase water tariffs in developing countries, hence, moving towards financial sustainability and supplementing the other two Ts - taxes and transfers. Based on accurate and updated socio-economic data, the tariff can also be optimised to fulfil the social equity objective.