Zambia initiated a series of reforms inthe early 1990s aimed at increasing sustainable water supplyand sanitation services. This was coupled with improvingwater resources management and enhancing contributions toeconomic growth and development. The reforms are embeddedwithin seven sector principles that were articulated in the1994 National Water Policy (NWP). The aim of the NWP was'to promote sustainable water resources developmentwith a view to facilitate an equitable provision of adequatequantity and quality of water for all competing groups ofusers at acceptable costs and ensuring security of supplyunder varying conditions.' The objective of this paperis to review the resource allocations and financial flows inthe water sector. It is the first in a series of five policypapers that includes the following: resource allocations andfinancial flows in water sector; comparative analysis ofopportunity costs of water supply in low cost and Peri-Urbanareas; equity and efficiency of rural water supply supportin Zambia; economic analysis of the impact of small dams onrural poverty in Zambia; and priority policy measures toimprove public expenditures in water sector.