UN’s Financial Crisis

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TOPIC: General Studies 2

• Role of UN; International organization

In News: The United Nations is running a deficit of $230 million, Secretary-General Antonio Guterres has said, and may run out of money by the end of October. In a letter for the 37,000 employees at the UN secretariat, Guterres said unspecified “additional stop-gap measures” would have to be taken to ensure salaries and entitlements are paid. To cut costs, Guterres mentioned postponing conferences and meetings and reducing services, while also restricting official travel to only essential activities and taking measures to save energy. 

Meetings canceled. Escalators stopped. Official travel limited. U.N. documents delayed. Air conditioning and heating reduced. Limits on interpretation to the U.N.’s six official languages. And the fountain outside U.N. headquarters paid for by U.S. school children and opened in 1952 shut down. These are some of the measures Secretary-General Antonio Guterres has ordered effective Monday at all U.N. facilities and operations around the world to deal with the United Nations’ worst cash crisis in nearly a decade.

There are 193 member states in the UN, but only 129 have paid their regular contributions to the budget. The UN’s regular budget for the year is $5.4 billion and it is separate from the peacekeeping budget of $6.5 billion. 

• India paid up its $23.25 million dues for the regular budget on January 30 itself, one of the few countries to pay up on time. While India has been among the few countries to have fully paid its dues to the UN on time, the UN owed India $38 million, among the highest it has to pay to any country, for peacekeeping operations as of March 2019.
• The United States is simultaneously the largest donor and the largest debtor. One of the reasons for the shortfall is the US, which funds 22 per cent of the UN’s regular budget amounting $674 million, not having paid up in full so far. The United States owes $381 million from prior budgets and $674 million for the regular budget, according to figures provided by the US mission to the United Nations. It also owes more than $2.6 billion for active peacekeeping missions.
• Brazil is second in line in unpaid dues for the regular budget, owing $ 143 million, followed by Argentina which owes $51.57 million, Mexico $36 million, Iran $26.96 million, Venezuela $17.29 million and South Korea $9.8 million.

What has the practice been?

The practice of meeting the cash requirement of active missions by dipping into the cash pool of closed peacekeeping missions and delaying reimbursements to Police and Troop Contributing Countries, creates a false sense of financial soundness.

This approach of creative accounting in managing a financial crisis has never worked and never will. It appears that the countries that owe arrears are somewhat insured from the impact of their inaction. India’s assertion that the practice of delaying payments to TCCs while other contractual obligations are met, impacts the UN’s ability to maintain honest agreements with TCCs on other aspects of the peacekeeping

While sufficient cash has been made available in the pool of closed peacekeeping mission accounts for reimbursing the Troop and Police Contributing Countries in accordance with the agreements signed with them, this cash has been diverted to managing the liquidity crisis of the active peacekeeping missions and at times shortfall in the Regular Budget, thereby deferring resolution to the pressing problem.

The United Nations is now effectively borrowing for prolonged periods from troop- and police-contributing countries. Many of them are low-income countries for which that imposes a significant financial burden. At the same time, the Organisation is asking those same countries to do more to train their personnel and improve the quality of their equipment, all while operating in increasingly challenging environments. The United Nations, however, is not fulfilling its obligation towards them in a timely manner.

Conclusion

A sustainable solution to the financial crisis would only emerge when member states begin to honour their budgetary obligations in full and on time. If member-states do not meet their budgetary obligations, then at least in the context of future peacekeeping operations we see two emerging situations – one, where even with the available cash pool Troop Contributing Countries would not be reimbursed on time and two, missions will close with a cash deficit, without fully reimbursing the Troop and Police Contributing Countries.

While the UN is working to become more effective, nimble, accountable, transparent and efficient, the success of the organisation’s efforts depends not only on the internal efforts of the Secretariat, but also on the support of Member States and on the predictability and adequacy of their financial contributions to UN programmes and activities.

Connecting the Dots:

1. Analyse the financial crisis in the UN. Suggest solutions to go past this situation.