Macro-Criticality of Water Resources

This paper examines the macro-criticality of water resources in the context of climate change. It summarizes the past and future trends of water scarcity and droughts and proposes a framework to analyze the macro-criticality and role of public sector engagement in the water sector. The paper maps out channels through which water resources affect the macro-fiscal and balance of payments positions and develops an understanding of macro-fiscal exposure based on empirical evidence. It also synthesizes emerging insights from IMF-supported operations and capacity development activities, thereby clarifying the rationale and scope for IMF engagement in water-related policy reforms.