Following a brief description of the country's economic background, through the impressive macroeconomic stability, and resumption of growth since 1995, the study identifies weak quality, and availability of basic social services, which have been affected by a drop in the government current expenditures. Despite unreliable data for a precise assessment of the water supply sector, the study examines the main issues, and constraints affecting water, and sanitation service levels, and quality. Although a high percentage of households in Baku, and other primary cities, are connected to piped water supply, this service coverage drops in secondary cities, and towns, with considerable drops in rural areas. The situation is aggravated considering that only fifty percent of wastewater in Baku receives treatment
while treatment coverage falls dramatically in other areas. The technical efficiency of operations reveals poor maintenance, and insufficient resources, exacerbated by a dual dimensions-reliability problem: service interruption and low pressure, and, water quality. The requirements as assessed by the study, address institutional, and governance reforms, to clearly define responsibilities for the Government, private sector, and stakeholders, suggesting financial, technical, and services reforms, to be implemented through four main programs, and, a continued Government dialogue, should support these recommendations, within the strategic context.