ate sufficient internal revenues to ensure basic financial sustainability. There are conflicting priorities for national government investment, and it is easy to postpone water investments. The sector has a high level of indebtedness, and its institutions INFRASTRUCTURE TO 2030: TELECOM, LAND TRANSPORT, WATER AND ELECTRICITY - ISBN 92-64-02398-4 © OECD 2006 5. THE IMPACTS OF CHANGE ON THE LONG-TERM FUTURE DEMAND FOR WATER SECTOR INFRASTRUCTURE have poor creditworthiness. It is also true that the supply of finance influences the level of investments - project sponsors would make greater efforts if they knew that funds were available on acceptable terms. The profile of urban water investment projects typically involves a high initial capital outlay, followed by a very long payback period from long-lived assets. As a result, the risk of repayment default is high relative to many other projects. In many developing countries, borrowing in local currency is only available at short maturities that do not match the long-term financing needs of water projects. When countries borrow in foreign currency, they must repay the debt using revenues generated in the local currency. There are a number of examples where an unfavourable movement in the exchange rate has triggered payment default in water projects (e.g. Argentina). However, the fundamental root of the finance problem in the water sector is poor governance. Providers of centralised water and wastewater services are monopolists by nature, and therefore require careful regulation. The information asymmetry between governments and water utilities, and the political sensitivity of water pricing, leave the sector vulnerable to ad hoc politics and social criticism. As a result, the sector often suffers from a high level of political interference, and a confusion of its social, environmental and commercial aims. Decentralisation, a worthy aim in a sector of this kind, has led to a devolution of responsibilities for service to sub-sovereign levels of government, but without a