World Enters ‘Era of Global Water Bankruptcy’

Lead author Prof. Kaveh Madani
 
Flagship report calls for fundamental reset of global water agenda as irreversible damage pushes many basins beyond recovery.

By UN University’s Institute for Water, Environment and Health
UNITED NATIONS, Jan 21 2026 (IPS)

The world is already in the state of “water bankruptcy”. In many basins and aquifers, long-term overuse and degradation mean that past hydrological and ecological baselines cannot realistically be restored.

While not every basin or country is water-bankrupt, enough critical systems around the world have crossed these thresholds, and are interconnected through trade, migration, climate feedbacks, and geopolitical dependencies, that the global risk landscape is now fundamentally altered.

The familiar language of “water stress” and “water crisis” is no longer adequate. Stress describes high pressure that is still reversible. Crisis describes acute, time-bound shocks. Water bankruptcy must be recognized as a distinct post-crisis state, where accumulated damage and overshoot have undermined the system’s capacity to recover.

Water bankruptcy management must address insolvency and irreversibility. Unlike financial bankruptcy management, which deals only with insolvency, managing water bankruptcy is concerned with rebalancing demand and supply under conditions where returning to baseline conditions is no longer possible.

Anthropogenic drought is central to the world’s new water reality. Drought and water shortage are increasingly driven by human activities, over-allocation, groundwater depletion, land and soil degradation, deforestation, pollution, and climate change, rather than natural variability alone. Water bankruptcy is the outcome of long-term anthropogenic drought, not just bad luck with hydrological anomalies.

Water bankruptcy is about both quantity and quality. Declining stocks, polluted rivers, and degrading aquifers, and salinized soils mean that the truly usable fraction of available water is shrinking, even where total volumes may appear stable.

Managing water bankruptcy requires a shift from crisis management to bankruptcy management. The priority is no longer to “get back to normal”, but to prevent further irreversible damage, rebalance rights and claims within degraded carrying capacities, transform water-intensive sectors and development models, and support just transitions for those most affected.

Governance institutions must protect both water and its underlying natural capital. The existing institutions focus on protecting water as a good or service disregarding the natural capital that makes water available in the first place. Efforts to protect a product are ineffective when the processes that produce it are disrupted.

Recognizing water bankruptcy calls for developing legal and governance institutions that can effectively protect not only water but also the hydrological cycle and natural capital that make its production possible.

Water bankruptcy is a justice and security issue. The costs of overshoot and irreversibility fall disproportionately on smallholder farmers, rural and Indigenous communities, informal urban residents, women, youth, and downstream users, while benefits have often accrued to more powerful actors. How societies manage water bankruptcy will shape social cohesion, political stability, and peace.

Water bankruptcy management combines mitigation with adaptation. While water crisis management paradigms seek to return the system to normal conditions through mitigation efforts only, water bankruptcy management focuses on restoring what is possible and preventing further damages through mitigation combined with adaptation to new normals and constraints.

Water can serve as a bridge in a fragmented world. Water can align national priorities with international priorities and improve cooperation between and within nations. Roughly 70% of global freshwater withdrawals are used for agriculture, much of it by farmers in the Global South. Elevating water in global policy debates can help rebuild trust between South and North but also within nations, between rural and urban, left and right constituencies.

Water must be recognized as an upstream sector. Most national and international policy agendas treat water as a downstream impact sector where investments are focused on mitigating the imposed problems and externalities. The world must recognize water as an upstream opportunity sector where investments have long-term benefits for peace, stability, security, equity, economy, health, and the environment.

Water is an effective medium to fulfill the global environmental agenda. Investments in addressing water bankruptcy deliver major co-benefits for the global efforts to address its environmental problems while addressing the national security concerns of the UN member states.

Elevating water in the global policy agenda can renew international cooperation, increase the efficiency of environmental investments, and reaccelerate the halted progress of the three Rio Conventions to address climate change, biodiversity loss, and desertification.

A new global water agenda is urgently needed. Existing agendas and conventional water policies, focused mainly on WASH, incremental efficiency gains and generic IWRM guidelines, are not sufficient for the world’s current water reality. A fresh water agenda must be developed that takes Global Water Bankruptcy as a starting point and uses the 2026 and 2028 UN Water Conferences, the conclusion of the Water Action Decade in 2028, and the 2030 SDG 6 timeline as milestones for resetting how the world understands and governs water.

Global Water Bankruptcy: Living Beyond Our Hydrological Means in the Post-Crisis Era | UN University Institute for Water, Environment and Health (UNU-INWEH) (20 January) (press release)

Support Paper
Madani K. (2026) Water Bankruptcy: The Formal Definition, Water Resources Management, 40 (78) doi: 10.1007/s11269-025-04484-0)

IPS UN Bureau