How Do We Manage a World in Water Bankruptcy?

According to a major new report from the United Nations University, global water systems are no longer in crisis, but have entered a state of chronic failure, with shortages that extend far beyond temporary shocks or short-term recovery.

Released on January 20 by the UN University’s Institute for Water, Environment and Health (UNU-INWEH), Global Water Bankruptcy: Living Beyond Our Hydrological Means in the Post-Crisis Era concludes that the planet has entered the era of global water bankruptcy. This indicates that long-term water use now exceeds renewable inflows, leaving much of Earth’s natural systems damaged beyond realistic repair. In other words, societies have already exhausted or polluted the natural buffers—rivers, aquifers, wetlands, and glaciers—that once sustained them. Droughts, shortages, and pollution events are increasingly becoming persistent features of daily life. In this post-crisis condition, the authors argue, it is best not to describe the situation as a crisis at all, but as water bankruptcy.

At the press conference set to release the report, Kaveh Madani, lead author and director of the UNU-INWEH, emphasized that this is not a semantic shift, but a clear warning that the dominant way governments, markets, and international institutions think about water is no longer fit for reality.

“For decades, scientists, the media, and policymakers have warned about a global water crisis… what we document in this report is a different reality emerging in many places: a persistent failure state in which water systems can no longer realistically return to their historical baselines,” Madani said.

Applied to water, bankruptcy management requires confronting overuse, acknowledging irreversible losses, and aligning development goals with hydrological limits.

The report does not claim that the entire planet is bankrupt. Water bankruptcy is assessed basin by basin and aquifer by aquifer. However, as regions across the globe simultaneously overdraw water and erode the natural systems that sustain it, the world faces a fundamentally altered risk landscape, with cascading threats to food security, agricultural markets, rural livelihoods, and climate feedbacks.

What distinguishes water bankruptcy from familiar narratives of scarcity is the scale of irreversibility. According to the report, societies have not only overdrawn annual renewable water flows, but have also liquidated long-term savings stored in groundwater, wetlands, glaciers, soils, and river ecosystems.

Over the past five decades, the world has lost approximately 410 million hectares of natural wetlands—almost the land area of the European Union—resulting in the disappearance of vital ecosystem services such as flood control, water purification, and habitat provision, valued at more than US$5 trillion. Groundwater depletion is even more consequential. According to the analysis, around 70% of the world’s major aquifers show long-term declining trends. Excessive pumping has already caused land subsidence across nearly 5% of the global land area, including dense urban zones that are home to close to 2 billion people. In some regions, land is sinking by up to 25 centimeters per year, permanently reducing storage capacity and increasing flood risk. These damages are not easily undone. Compacted aquifers, subsided deltas, dried-up lakes, and extinct species represent long-term, irretrievable losses.

As Kaveh Madani emphasizes, “This is not another warning about a future we might still avoid everywhere… It is a diagnosis of a world where, in many basins, the old normal is already gone.”

The current human cost and future risks of water bankruptcy are also staggering. According to the report, nearly three-quarters of the world’s population lives in countries classified as water insecure or critically water insecure. About 2.2 billion people still lack safely managed drinking water, 3.5 billion lack safely managed sanitation, and roughly 4 billion experience severe water scarcity for at least one month each year. The risks are compounded given more than half of global food output is located in regions where total water storage (including surface water, soil moisture, snow, ice, and groundwater) is already declining or unstable.

The report’s crux is that the global water agenda remains stuck in a crisis-response mindset that is no longer fit for purpose. Such alarming figures are partly the result of governments, utilities, and basin authorities continuing to treat chronic overshoot as a temporary emergency. Short-term emergency measures, supply expansion, and incremental efficiency gains dominate policy discussions, even as underlying water balances continue to deteriorate. Ultimately, this only deepens ecological damage and entrenches unsustainable water-use practices.

Madani was clear at the press conference: “Expecting a wicked problem of this scale to have a simple solution is as naïve as the reductionist solutions that helped get us into the current state,” he said.

Instead, the United Nations University calls for a shift to what it terms bankruptcy management, a concept borrowed deliberately from finance. Applied to water, bankruptcy management requires confronting overuse, acknowledging irreversible losses, and aligning development goals with hydrological limits. It also demands protecting remaining aquifers, wetlands, soils, rivers, lakes, and glaciers, rather than treating these life-sustaining systems as expendable capital to prop up unsustainable growth.

The report itself also highlights the social and political dimensions of water bankruptcy, stressing that it is not solely an environmental issue. The costs of hydrological overshoot fall hardest on those least responsible and least able to adapt: smallholder farmers, Indigenous communities, and the urban poor. The authors caution that demand reduction is not politically feasible if treated as a purely technical exercise, noting that abruptly cutting water access for farmers could trigger unemployment, social unrest, and broader instability. Effective management, they argue, must be paired with political and economic transitions that protect livelihoods, provide compensation and risk support, enable shifts in crops and practices, and help economies decouple jobs and growth from ever-rising water use.

Despite their sober diagnosis, the authors do not end in resignation, arguing that water could—and existentially must—still serve as a unifying axis in an increasingly fragmented world. Given water intersects climate, biodiversity, food systems, public health, land use, and political stability, it remains one of the few domains where coordination is both necessary and unavoidable.

“Investing in water is an investment in delivering on all of those [aforementioned] agendas,” said Madani, at the report’s launch. “And in rebuilding cooperation in a fragmented world.”

Similarly, authors stress the importance of upcoming political milestones: the UN Water Conferences in 2026 and 2028, the conclusion of the Water Action Decade, and the 2030 Sustainable Development Goals deadline. They argue these moments offer a rare window to reset the global water agenda to move beyond incremental efficiency gains and emergency responses toward explicit recognition that many river basins and aquifers have already crossed thresholds where historical conditions cannot be restored.

Yet translating this clarity into action faces stark political and institutional realities. The UN system, tasked with leading such a reset, remains mired in member states cutting funding, worsening geopolitical polarization and international conflict, and key bodies—including the Security Council—grossly failing to uphold the UN Charter’s basic human rights mandates. In practice, declarations and frameworks proliferate, deadlines are extended, but meaningful, coordinated action remains slow, uneven, or hollow. Water may be uniquely cross cutting, yet it is not immune to these structural constraints or the apparent erosion of accountability. Crucially, it also requires that primarily Western, early-industrial economies reckon with histories of inequitable use and extraction that have both driven water shortages and contributed to the persistent inequities of scarcity today.

As with other pressing global crises, the consequences of water bankruptcy may unfold faster than governments and institutions can respond, but the authors argue that naming the problem clearly could galvanize civil society and decision-makers into meaningful action before it’s too late.

“Our message is not despair,” Madani concluded. “It’s clarity. The earlier we face the real balance sheet, the more options we still have.”