Macro-Criticality of Water Resources

IMF Working Papers, December 5, 2025

Source details

Authors: Suphachol Suphachalasai, Ximing Dong, Pedro Juarros, Junko Mochizuki, Christine J. Richmond, Sylke von Thadden-Kostopoulos
Published: December 5, 2025
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9798229033534.001

Examines the macro-criticality of water resources in the context of climate change.
Summarizes past and future trends of water scarcity and droughts.
Proposes a framework to analyze macro-criticality and the role of public sector engagement in the water sector.
Maps channels through which water resources affect macro-fiscal and balance of payments positions.
Develops an understanding of macro-fiscal exposure based on empirical evidence.
Synthesizes emerging insights from IMF-supported operations and capacity development activities to clarify the rationale and scope for IMF engagement in water-related policy reforms.

Water scarcity and droughts have identifiable past trends and projected future trends relevant for macroeconomic stability.
Water resources influence macro-fiscal positions through multiple channels and can have balance of payments implications.
A formal framework can be used to assess macro-criticality and the appropriate public sector engagement in the water sector.
Empirical evidence helps quantify macro-fiscal exposure to water-related shocks.
IMF-supported operations and capacity development activities provide emerging practical insights for policy design and reform priorities in the water sector.

Presents a framework to:
- Analyze macro-criticality of water resources.
- Determine the role and scope of public sector engagement in water resource management.
Maps channels linking water resource dynamics to:
- Macro-fiscal outcomes.
- Balance of payments positions.
Uses empirical analysis to develop an understanding of macro-fiscal exposure to water shocks.

Clarifies rationale for IMF engagement in water-related policy reforms, informed by:
- The macro-criticality framework.
- Empirical evidence of fiscal and external exposures.
- Lessons from IMF-supported operations and capacity development.
Implied policy focus areas include:
- Strengthening public sector roles where macro-criticality warrants.
- Designing fiscal and external resilience measures to mitigate water-related shocks.
- Integrating water resource considerations into macro-fiscal surveillance and program design.