This chapter focuses on the waste water disposal issues in Kandy, Sri Lanka, that includes a world heritage site because of its cultural, historical and aesthetic values. It discusses the experience and possible implications of foreign aid projects globally and in Sri Lanka, and reviews the debate on foreign aid, aid dependency and development. The chapter analyzes the process that led to the deteriorated financial crisis of the National Water Supply and Drainage Board (NWSDB) that forced the organization to go for the proposed project with foreign assistance. It discusses the current problem in Kandy city and the expected benefits and estimates costs of the Kandy City Water Supply Augmentation and Environmental Improvement Project. Pollution by sewage, fertilizers, pesticides and toxic metals degrade the quality of water available for human consumption combined with NWSDB incurring progressively higher cost in treating water. Rural water supply and sanitation, including deep well programs, are being implemented by the board.