Defining Strategic Financial Planning

Strategic Financial Planning (SFP) is an approach and methodological framework to ensure that the financing of water and sanitation (WSS) infrastructure and services matches the policy ambitions. The SFP approach aims to foster a national policy dialogue amongst interested parties with the aim of developing consensus on what WSS services the country can or should afford in the next 20-30 years and how it will pay for them. More specifically, SFP provides a guiding framework to “who (users, taxpayers, industries) should pay for what (operating/capital expenses, water/sanitation, rural/urban/peri urban areas) and what should be the future service level. It determines how much money is needed and where it would come from” (OECD, 2009, 53). The outcome of an SFP is a report or plan with specific output that can support policy makers taking more informed financial and operational decisions. 

The objectives of SFP are (OECD, 2011):   

  • Building consensus on goals: Providing a structure to enable a policy dialogue to take place, involving all relevant water stakeholders, with the aim of producing a consensus on a feasible and sustainable WSS service delivery model. 
  • Generating scenarios for a financial strategy: Illustrating the impact of different objectives and targets in a long-term perspective. 
  • Fostering institutional coordination: Linking sector policies, programmes, and projects in relation to WSS. 
  • Matching financial needs with investment flows: Facilitating external financing by providing clear and transparent data on financing requirements (Fig. 1).