PAKISTAN: Water Resources Option Study For Karachi

Karachi, Pakistan’s largest city, is experiencing a water and sanitation crisis stemming largely from poor governance. Financing for this sector is typically ad-hoc and aimed at addressing immediate needs, rather than long-term goals. Only 55 percent of water requirements are met daily and non-revenue water (NRW) can be as high as 60 percent. Many households rely on private vendors who sell water from tankers at high prices.  

The Karachi Water & Sewerage Board (KWSB) is responsible for water, sanitation and hygiene services. Its service gaps stem from operational challenges, chronic under-investment, and a weak enabling environment. KWSB has not had significant capital investment for over a decade, even though a 2008 masterplan estimated investment needs of over $2.5 billion to achieve universal access to safe and affordable drinking water by 2030.  

Following KWSB undergoing structural reforms—with hopes to embark into PPPs and private sector participation (PSP) for wastewater reuse and NRW reduction—PPIAF supported a Water Resources Options Study to help KWSB better understand different options to augment raw water supply, cost implications, reainess for private participation in water production development, and to inform its capital investment program.  

The PPIAF study was undertaken simultaneously with the preparation and approval of a major World Bank and Asian Infrastructure Investment Bank (AIIB) co-financed investment program, the Karachi Water and Sewerage Services Improvement Project (KWSSIP). It allowed key findings—such as the required NRW programs to improve utility efficiency and recommended changes in the utility management structure—to be integrated into the investment program.  

Based on assessing demand, supply, timing, costs and affordability, the study recommended the following options in this sequence: exploit existing surface water from the Indus River; maintain water quality through waste water treatment investments with recycling; and control non-revenue water. More detailed work at the downstream level is needed to prepare an adequate PSP solution and to support the preparation of transactions.  

The study contains clear areas for follow-up, notably setting up a PPP-node in KWSB and designing policies for incentivizing PSP, including wastewater viability gap support. Developing these institutional and legal preconditions for a successful PPP in the water sector in the province of Sindh would constitute a natural focus area for follow-up by PPIAF, in close cooperation with technical assistance undertaken under the ongoing KWSSIP Bank project.