Transboundary water conflicts over hydropower and irrigation: Can multilateral development banks help?

Water conflicts may arise on transboundary rivers with upstream hydropower use and downstream irrigation use. This occurs because upstream water release does not coincide with seasonal irrigation needs of the downstream riparian. This paper examines the role that multilateral development banks (MDBs) may play in reducing conflict - a role that arises because MDBs have a comparative advantage over other development agencies in promoting transboundary water management. We consider and rank the qualitative impact of a range of infrastructure projects, potentially initiated and co-financed by MDBs. Basinwide social efficiency and regional stability can, under certain conditions, by improved through Pareto-improving investments, including enhancement of upstream hydropower efficiency and expansion of downstream reservoir capacity. The findings are used to analyse infrastructure projects currently under consideration in the Syr Darya Basin in Central Asia.