More than 1 billion people will not get the basic sanitation and the clean water promised as such projects shrink sharply as a proportion of global aid budgets

A key development goal to halve the number of people without access to basic sanitation by 2015 will be missed because donor countries have diverted aid money away from "unsexy" water projects, according to the World Bank and the charity WaterAid.

Aid to give people in developing countries access to clean water and sanitation has been shrinking as a proportion of global aid budgets, new research has shown, with the result that more than a billion people will not get the help they were promised by rich countries under the millennium development goals.

Instead, donors are restricting aid to "sexier" projects such as schools and hospitals – even though the benefits of those are diminished if their recipients have no clean water or toilets.

She predicted that the millennium development goal on sanitation – to halve by 2015 the number of people without access to basic sanitary facilities – would be missed by a long way. If the millennium goals were reached, of the 2.6bn people without access to sanitation today, at least 1.7bn would be equipped with decent facilities by 2015. But on current trends, only about 700m will gain such access in the timeframe.

"It shows how far water and sanitation have slipped down the list of donor priorities," said John Garrett, senior policy analyst at WaterAid, which compiled the research using information from the Organisation for Economic Co-operation and Development (OECD). "Yet the global sanitation crisis is so massive – this is totally insufficient to tackle the problem."

This lack of effort on water and sanitation is also having an effect on the economies of developing countries, which can be quantified for the first time. The World Bank has recently shown that more than 6% a year is being wiped off the GDP of countries failing to provide their citizens with adequate sanitation, because of health effects and the resulting lack of education and work opportunities.

"When you think that 2% of GDP is the difference between growth and recession, we are having the equivalent of three recessions every year in these places. But no one is taking any notice," said Julia Bucknall, the World Bank's water chief. "It's astounding."

"We are way off track, and 1 billion people will be let down. The aid flows are very small compared with what is needed," said Garrett.

Women and girls are hardest hit by the failure to provide water and sanitation, a newly published study by the World Bank has shown. Because they are more likely to be responsible for water collection, time spent fetching water is spent away from school or other productive activities such as farming. Girls are also often prevented from going to school past puberty if there are inadequate sanitation facilities. The bank found that a 15-minute reduction in the time spent collecting water increased the proportion of girls attending school in Ghana by between 8% and 12%.

Water and sanitation projects shrank as a proportion of total aid from rich to poor countries in the last 20 years, according to research from WaterAid due to be published next month. In the mid-1990s, water and sanitation made up about 8% of global financial aid, putting it ahead of issues such as reproductive health and population growth. But between 2007 and 2009 – the last year for which comprehensive figures are available – it was just over 5%.

That fall in the proportion of aid for water and sanitation means many developing countries are not getting the support they need. The problem is particularly bad in sub-Saharan Africa, according to Garrett. "A lot of what aid there is tends to go to middle-income countries, and the least developed countries who need it the most are left out," he said.

Investing in water and decent sanitation has been found to be one of the most effective uses of development aid. The UN estimates that every $1 spent on sanitation reaps an economic benefit of at least $9, because of improvements to health and because it frees people to be more economically active.

Although more aid is being devoted to water and sanitation today in absolute terms than in the 90s – about $8bn last year compared with $4bn-$5bn then – that comes against a background in which aid spending as a whole has increased markedly. The diminishing proportion of aid devoted to sanitation shows donors unwilling to address what is seen as a difficult and unglamorous area of policy, according to people working in the field.

"It just does not attract donor funding," Bucknall said. "It seems to be easier for people to talk about disease, and ignore sanitation."

Jae So, manager of the water and sanitation programme at the World Bank, said at least $7bn a year was being lost in economic productivity in south-east Asian countries through neglect of the issue. The majority of the losses in some areas came not from the ill health to poor people but tourism. "Tourists don't want to come if they think they might have contaminated water or inadequate sewage. It's a huge lost economic opportunity."

The water crisis is likely to worsen, as most of the world's population increase is among slum-dwellers, and as climate change takes effect.

Bucknall said: "More children die of diarrhoea [caused by dirty water or inadequate sewage systems] than die of Aids, malaria and TB combined. I think it is unacceptable that 2.6 billion people don't have a means of separating themselves from their faeces. It is a moral outrage."

The World Bank has tripled its lending on water issues in the last decade, to about $6bn a year. It also has a programme to help developing countries gain access to best practice on how to design new sanitation programmes.