Water pricing can be understood as an important root of water quantity and water quality problems in developing countries – but also as a possible solution to them. This paper proposes an analytical framework to understand challenges related to pricing water supply and sanitation. The framework rests on three criteria: efficiency, cost-recovery and affordability. It highlights that the actual effects of water pricing do not only depend on its design but also on the institutional and technical environment it is embedded in. The framework is used to identify and analyze challenges to water pricing for the case of water supply and sanitation system in Lima, Peru.
