"Contaminated drinking-water is estimated to cause more than 500,000 diarrhoeal deaths each year and is a major factor in several neglected tropical diseases, including intestinal worms, schistosomiasis and trachoma," she added.
The report welcomed the fact that countries had on average raised their annual budgets for water, sanitation and hygiene by 4.9% over the past three years.
But it says 80% of countries acknowledge that their financing is still not enough to meet their nationally-set targets for increasing access to safe water and sanitation.
"In many developing countries, current national coverage targets are based on achieving access to basic infrastructure, which may not always provide continuously safe and reliable services," the WHO warned in a statement.
Guy Ryder, Chair of UN-Water and head of the International Labour Organisation, says "increased investments in water and sanitation can yield substantial benefits for human health and development, generate employment and make sure that we leave no one behind".