Water Bankruptcy: Getting Beyond The Rhetoric, to Long-Term Integrated Water Management (Part of the Water Series)

On March 22 , 2026, we celebrated World Water Day. Two months earlier, in January , the United Nations University’s Institute for Water, Environment and Health (UNU-INWEH) warned the world was entering an era of “global water bankruptcy”. In conjunction with World Water Day 2026, BERNAMA published an article asking, “Water Bankruptcy Is Coming. Are We Prepared? The official reply from Putrajaya two days later, from the Minister of Energy Transition and Water Transformation: Malaysia is not among countries at risk of ‘water bankruptcy’, as feared globally, as it still has sufficient raw water resources. Malaysia, the minister clarified, receives over 2,500mm of rainfall annually, with renewable water resources exceeding 580 billion cubic metres per year, indicating no physical water shortage. The Hon. Minister further explained that, the real challenge lay in managing water resources in an integrated way, protecting river basins, and improving the efficiency of the national water supply system. In a statement, he concluded, “The country’s main challenge is not a lack of water, but how we manage, protect and optimise water resources strategically to ensure long-term water security, resilience and sustainability.” “Overall, active dam storage can supply water for up to 90 days (three months), while the national nonrevenue water (NRW) rate remains around 34.3%, meaning about six million litres of treated water are lost each day,” he added, explaining both the storage reserve and challenges inherent in the water delivery system.

Perhaps it would be useful to explain what water bankruptcy is and how it might differ from a temporary water crisis. Kaveh Madani, Director of the UNU-INWEH, told BERNAMA that Water Bankruptcy can be understood through a simple financial analogy: surface water systems are like a checking account renewed by nature each year, while groundwater acts as a savings account. “Water bankruptcy happens when you not only exhaust your checking account, but also drain the savings account because for too long your expenditure or water consumption is way more than the available water,” he said.

It is easy to see why many may think that Malaysia’s high annual rainfall - averaging roughly 3000mm annually - should easily meet the country’s water needs. Most of Malaysia receives rainfall all the year round, much of it coming from the two monsoon seasons, the north-east, in the northern hemisphere winter months, and the south-west, in the northern hemisphere summer months. States on the east coast of Peninsular Malaysia expect the “musim tengkujuh” and the annual floods it brings. In his message, Kaveh reminds his readers that natural abundance can be misleading, adding, “If your region is very green, that also means the environment has a high share of water resources. Not every drop of water that falls in a green area belongs to humans,” he said. “Nature also has a high share, which people often forget.”

Kaveh’s take-home message to us is that the natural forests, lush plantations and urban greenery that surrounds us (and, that we regard with some pride, and pat ourselves on the back for wisely conserving on the basis of its biodiversity, economic value, and carbon sink and sequestration capacity), is effectively ahead of us in the queue for the water our rainfall provides.

Unlike forests that evolved, for example in Queensland, Australia, that receives one sixth the rain that most of Malaysia receives, or the dry zone in Thailand, that receives just a third of what most of Malaysia receives, Malaysia’s forests evolved in a situation of relative water abundance. So whereas forests in dryer parts of the world curtain their transpiration to conserve water, Malaysia’s forests, accustomed to water abundance, use copious amounts of water to overcome heat stress. Studies at Malaysia’s Pasoh Forest Reserve have shown that evapotranspiration, the mechanism that cools both trees and their surroundings, remains fairly consistent - around 1200mm a year - even during dry periods. During a dry spell, our forests simply access water from deeper layers (0.5m and beyond) of the soil.

The economics of this system can most easily be understood as: The cooling service that forests, plantations and other biological ecosystems provide is driven by temperature, but the bill is paid in water. Another way to think about this is that more than a third of our normal annual rainfall has been pre-booked for ecosystem services provided by nature, and this demand remains consistent regardless of reduced rainfall during dry periods. Upon entering rivers, the remaining water feeds our agricultural crops, and is captured by dams and water treatment plants for our use. As we have noted above, this residual amount will vary based on the rainfall received at the outset and needs to be prioritised according to the various demands of both natural (rivers and their ecosystems), and built environments.

In the upsoming issue, we will examine these demands and gain an appreciation for the rates at which we draw down some of our existing storage.