With funding from the EU and the EIB, the EBRD is helping modernise Moldova’s crumbling water system. A €10 million sovereign loan will co-finance a water utilities development programme.
The statistics are sobering: currently only 45% of people in Moldova have access to good quality water. A mere 17% of rural communities are connected to both the water supply and sewerage systems and over a third of the national water distribution network is in an unsatisfactory technical state.
In rural areas, shallow wells constitute the key source of water supply, which are often contaminated by human and animal waste and seldom comply with international quality standards.
The EBRD is supporting the modernisation of Moldova's water system with a €10 million sovereign loan to co-finance a water utilities development programme. It’s the first water project in the country to focus on the regionalisation of water services and the creation of regional water companies.
"The Moldovan water supply and wastewater sector is hugely underdeveloped and faces many challenges," says EBRD banker Dana Craciunescu from the Municipal and Environmental Infrastructure team.
"Infrastructure, a significant part of which dates from the 1970s, is collapsing and emergency repairs cannot keep pace with the breakdown in pipes, buildings and mechanical installations."
Decentralisation vs fragmentation
The sector was effectively decentralised in 2000 when responsibility for the provision of water and sanitation services was devolved to the individual municipalities and their subsidiary waterworks.
The result is a highly fragmented water supply and wastewater system with several small, poorly managed and weak waterworks. In addition, existing water tariffs are often too low to even cover operation and maintenance costs.
Libor Krkoska, Head of the EBRD’s Chisinau Resident Office, says a commitment by municipalities to reform – including a willingness to regionalise inefficient, small water utilities and to implement tariff reforms – were key selection criteria during project preparation.
“We have worked closely with the EIB and the EU, our co-financiers, as well as with other donors active in the water sector, to ensure that this pilot project could be followed up with other regionalisation projects to promote sector-wide restructuring based on financial viability, affordability and cost efficiency,” Krkoska adds.
The proceeds of the EBRD loan will be on-lent to the water companies in six reform-minded localities – Floresti, Soroca, Hancesti, Orhei, Leova and Ceadar-Lunga – to finance the upgrade and the extension of the water and wastewater systems in these towns.
The project will support the participating companies in expanding their operations into neighbouring localities and help them become viable regional operators. In addition, the participating utilities will expand the water supply systems and wastewater collection to neighbouring villages.
“The programme will facilitate access to safe drinking water in approximately 40 towns and villages, reduce pollution and contribute to the improvement of public health,” says Alexandru Cosovan, EBRD banker in Chisinau RO.
“It will also support the decentralisation of municipal infrastructure provision in Moldova, providing the utilities in small and medium-sized localities with access to financing and introducing a contractual relationship between the local authorities and water utilities through Service Agreements.”
With a total cost of €30 million, the programme is co-financed by a €10 million loan from the EIB and a €10 million grant from the EU’s Neighbourhood Investment Facility (NIF). The EBRD is providing an additional €2 million in technical assistance grants to assist the project’s implementation.
“The current state of the water supply and wastewater infrastructure in Moldova is extremely precarious and the Moldovan government has asked international lenders to help address the problem by financing the modernisation of water services,” said Veaceslav Negruta, Moldovan Minister of Finance at the signing ceremony in Chisinau.
“We are highly appreciative of the support and assistance provided by the EBRD throughout its activity in Moldova for the implementation of strategic projects. We hope to continue our cooperation with the Bank to ensure Moldova’s sustainable development.”
Thomas Maier, EBRD Managing Director for Infrastructure, was also at the signing. “Supporting public infrastructure projects, particularly in the water sector outside the capital Chisinau is one of the Bank’s priorities in Moldova,” he said.
“This important programme will bring significant service improvements and health benefits to the population in the suburban regions and will help water companies become efficient regional business operations.”