Economic Analysis of Water Service Investments and Tariffs in Cairo, Egypt

Abstract

Donor agencies invested millions of dollars in the 1980s and 1990s to improve water and wastewater services in Cairo, Egypt. An economic analysis of these investments raised several issues relevant to planning and financing similar projects. First, some service improvements have more value to households than others (i.e., a water connection was worth more than improved reliability of water service). The choice of how to allocate scarce project resources among different possible service improvements may substantially affect the measured benefits of the project. Second, recovering project costs through the fixed tariff charged for water and wastewater services in Egypt may charge a substantial portion of a household more than they are willing to pay for the services. Quantity-based pricing that allowed households to adjust their water use to their budget would allocate program costs among households in a manner more consistent with the value of the services.