PRESS BRIEFING BY UNDER-SECRETARY-GENERAL FOR ADMINISTRATION AND MANAGEMENT

30 April 1996

Press Briefing

PRESS BRIEFING BY UNDER-SECRETARY-GENERAL FOR ADMINISTRATION AND MANAGEMENT

19960430 FOR INFORMATION OF UNITED NATIONS SECRETARIAT ONLY

At a Headquarters press briefing Monday afternoon, the Under-Secretary- General for Administration and Management, Joseph E. Connor, told correspondents that the United Nations financial situation remained precarious. Unpaid assessments owed by Member States totalled $2.8 billion. Of that amount, $1.5 billion was owed by the United States, $400 million by the Russian Federation, and $250 million by Ukraine.

He added that the regular budget cash forecasts presented to the Member States in February had estimated a regular budget cash balance of $79 million as at 30 April. However, as of Tuesday, the regular budget cash balance would be zero.

The shortfall in regular budget cash was due largely to the fact that payments from three Member States -- the United States, Germany and Japan -- had not fully met the forecasts they had provided to the Organization in February, he continued. Japan was in the midst of its own national budget impasse, which must be resolved before it could pay the remaining portion -- $128 million -- of its regular budget assessment for 1996. Therefore, despite the fact that 53 Member States had already paid in full their 1996 assessment, the United Nations would have to borrow, once more, from peace-keeping funds to meet regular budget obligations.

Mr. Connor said that, in recent days, there had been two positive developments that would mitigate the Organization's precarious financial position. Last week, the United States legislated a national budget for the fiscal year beginning 1 October 1995. That legislation would result in cash payments of about $256 million more than had been forecast to be received in 1996. In effect, the payments would represent a late payment of the United States regular budget assessments for 1995, which should have been paid by 31 January 1995 -- 15 months ago.

Member States had also been making contributions to the peace-keeping budget, Mr. Connor continued. For the 1996 regular budget, the Organization would have to wait for the next United States budget -- for the fiscal year beginning 1 October 1996 -- to see if it would approve payments for its 1996 regular budget assessment. The Organization would also have to wait for action on President Clinton's plan to pay all his Government's United Nations arrears in five years.

Welcoming the United States action and the Russian Federation's announced intention to pay $400 million in 1996 ($46 million to the regular budget and $354 million to the peace-keeping budget), Mr. Connor said the Russian payment was $275 million more than had been forecast in 1996. Since last year, the Russian Federation had been up to date on all regular budget assessments. The added payments would substantially decrease their peace- keeping arrears. However, he added, "Promises are good but cash is better". Despite the encouraging news, and as a result of the expected payments, a revised forecast of the negative cash balance of $200 million in the regular budget was now projected for the end of 1996. That year-end cash deficit had initially been estimated at approximately $400 million. The Organization would need to borrow from peace-keeping funds, beginning in mid-August.

One of the major consequences of borrowing from peace-keeping was the continuing debt of about $725 million to $800 million owed to Member States for troops and equipment they had provided to peace-keeping missions, he continued. Some of that debt had existed for several years. The only means of paying off that debt was through the collection of long overdue contributions from Member States. The major debtor was the United States, which would still owe about $1.3 billion for both regular budget and peace- keeping assessments.

Asked how the United States was paid when it contributed to peace- keeping operations, Mr. Connor said it was paid in the same way as any other Member State. At present, the United States was owed about $25 million for its peace-keeping contributions. Asked further if the monies owed to the United States were not offset against its debt, Mr. Connor said the Organization was not allowed to do so, although such suggestions had been made by some Member States. However, it had not yet been legislated.

Seeking clarification about the $256 million expected from the United States, a correspondent asked what the total amount expected to be paid by the United States was for 1996. Mr. Connor said that prior to the recent congressional legislation, the United States had paid $313 million. Only an additional $94 million had been previously anticipated from the United States in the Organization's cash forecast. Now, $256 million more would be paid than had earlier been estimated ($122 million for the regular budget and $134 million for peace-keeping). Asked by another correspondent for more clarification on the amount that the United States would pay to the United Nations in 1996, Mr. Connor explained it in the following way: Of the $304 million approved by Congress for regular budget payments, $139 million had already been paid and $165 million was outstanding; of the $359 million approved for peace-keeping budgets, $174 million had already been paid and $185 million was outstanding. (The total of the outstanding amounts was $350 million -- $165 million plus $185 million.) Mr. Connor added that $94 million was the amount expected from the United States when the cash flow forecast was prepared in February, but $256 million was now expected.

Connor Press Briefing - 3 - 30 April 1996

Asked about the cash situation at the end of April, Mr. Connor reiterated that the Organization had no cash as at 30 April, and it would have to borrow an amount not exceeding $50 million from peace-keeping funds Tuesday to carry the Organization through May. He expected that the amount would be repaid when Germany and Japan paid their contributions for 1996. Both Member States usually paid their contributions promptly and had reaffirmed that they would pay the amounts forecast for them by early June. Mr. Connor said he was also hopeful for prompt payment from the United States of the amounts that were just legislated. The Organization would need to borrow again at the end of August when it was expected to run once more out of regular budget cash, he added.

What was the effect of such borrowing from the peace-keeping budget? asked a correspondent. Mr. Connor said it meant that peace-keeping missions would not have access to as much cash as they would have had. By the end of 1996, about $200 million would have been borrowed from the peace-keeping budget -- approximately the same amount borrowed last December. The United States payments would reduce the amount to be borrowed from peace-keeping at 31 December 1996 from $400 million to the revised estimate of $200 million.

When asked how much was still owed to the peace-keeping budget as a result of borrowing, Mr. Connor said the debt from previous borrowing had been repaid in full in February when Member States began to pay regular budget contributions.

In response to a question about the status of reimbursements to Member States which had contributed troops and equipment to peace-keeping missions, Mr. Connor said that, as of Monday, those Member States were owed over $1 billion. He hoped to reduce that to about $800 million by the end of the year, providing the remainder of United States and Russian funds were paid by December.

To a related question, he said that the $800 million debt to troop- and equipment-contributing countries could be repaid if the United States paid its huge amount of arrears. At the end of December, it was estimated that Member States would owe $2.1 billion to peace-keeping budgets, of which the United States would still owe $1.3 billion -- even after the expected payments. By December, the United States would owe the largest percentage of the total debt. Of the $400 million the Russian Federation would pay this year, the bulk of those monies would be applied to that Member States arrears for peace- keeping assessments, which was also about $400 million. That application would reduce most significantly that Member State's peace-keeping arrears by the end of 1996.

Asked about the amount owed by Germany, he said that Member State owed $49 million. Germany had been the first to pay with $49 million in January. The second payment of $49 million had been delayed, but was now expected in June.

Connor Press Briefing - 4 - 30 April 1996

When was the United States expected to pay the legislated amounts? asked a correspondent. Mr. Connor said no definite payment dates had been given. The legislation had been signed last week and his Department had been told that "they would pay as promptly as they can". As a "guesstimate", he said he hoped to receive the bulk of the monies around 1 June. "It does take time to get a cheque out of the United States Government -- mechanically", he said.

When asked what was the amount that should be received from the United States by 1 June, Mr. Connor said he did not expect the total amount of $256 million at that time. Payment of the amount was subject to a condition that the Organization's 1996-1997 regular budget should not show any overall increase due to subsequent changes in the programme of the Organization. The Secretary of State of the United States must certify that this condition is met before the money was paid.

He went on to say that the Secretary-General did not intend to exceed the regular budget cap of $2.6 billion. When faced with proposals for new activities, the Secretariat would consider how they could be absorbed within the approved regular budget. The Secretary-General was now asking Member States to identify programmes that could be curtailed or eliminated, to accommodate the addition of new activities, without expenditures to exceed the approved amount. The Secretary-General had no authority to curtail or cease to perform mandated activities. Reductions of $250 million had already been identified when the budget was approved. Cost-reduction techniques had been applied while the Secretariat tried to ensure that mandates were fulfilled. "It gets harder, on top of $250 million, to find other cuts, so we want to encourage Member States to suggest things that should no longer be done."

Asked for examples of savings, Mr. Connor said that the Organization had achieved a significant vacancy rate, to date, of about 700 posts, on a voluntary basis, out of a target of 800 posts. However, the final amount might exceed 800 because of the need to continue to fill posts at the P-2 and P-3 level with personnel recruited through the national competitive examinations. Therefore, the 700 figure was only a resting point.

By how many did he plan to exceed the 800 target? a correspondent asked. Mr. Connor said it depended on the number of new recruits agreed upon. "We don't want to become a static organization. We must bring in new blood at the bottom." Stressing that the mandate for an increased vacancy rate throughout the 1996-1997 biennium should not be delayed, he said the longer the Organization took to achieve voluntary separations, the more staff members would be separated so that an increased vacancy rate could be achieved.

Another correspondent asked if the remaining 100-plus posts of the 800 targeted would "get the pink slip". Mr. Connor said the Secretariat had started a new voluntary separation programme which had been outstanding for about 10 days. The results of that were not yet known.

Connor Press Briefing - 5 - 30 April 1996

When asked how much existed in the peace-keeping budget that the Organization could borrow, he said the focus should be on the end of the year, when it was estimated that there would be $586 million in cash in the peace-keeping budget and a negative balance of $200 million in the regular budget -- a net of $386 million cash. That was much better than the $80 million negative cash balance that was forecast a few months ago. The payments from the United States and the Russian Federation, when received, would change the total cash flow situation.

Asked if there was a priority system for reimbursement to peace-keeping contributors, such as Member States that were cash-strapped developing countries, Mr. Connor said there was no preferential system on the basis of need. Member States usually identified to which peace-keeping mission they were contributing, and the monies paid for a particular mission were used to pay the troop and equipment debt for that particular mission in order of the length of time of the outstanding debt. That had been the fairest way of dealing with the situation, since all Member States were considered equal. No preference had been given on the basis of any particular criteria. The United States, like all Member States, had to wait in line to be reimbursed.

Asked again about the Organization's borrowing, Mr. Connor explained that the Organization had separate accounts for the regular and peace-keeping budgets, as mandated. The two budgets should be operated on the basis of cash inflows and outflows of those two separate sources of cash during the course of the regular budget biennium, or during the course of the peace-keeping missions. Borrowing from one because of a depletion of cash in the other was imprudent financial management, which could only be justified because it was better than running out of cash. That was the only course of action during 1995, and again in 1996. And by the end of 1996, the regular budget would have a projected negative cash balance of $200 million.

Asked for more examples of the effect of the cash crunch, he said in the case of peace-keeping missions any cash inflow would be used to pay for such things as food and subsistence needs, housing, and salaries of staff members on the mission. However, Member States, as the only creditors, had not been paid approximately $1 billion. As a result, there was still cash in the peace-keeping funds that could be loaned to the regular budget. If the troop- contributing countries had been paid what was owed to them, there would be no peace-keeping cash either. The Organization had deliberately delayed payment to those Member States. "It was a little bit like moving it around from one pocket to another", he said. He went on to say that the size of the debt had been alarming. Taken together, the negative cash position in regular budget cash and the huge debt owed to Member States for peace-keeping were the two pressure points on the Organization. There was no alternative but to borrow from the peace-keeping budget to fund the regular budget, despite Member States concerns. He had hoped that he would have received cash inflows to the regular budget this year that would have precluded such action in the future.

Connor Press Briefing - 6 - 30 April 1996

Asked again for the figures on the debt to both budgets, Mr. Connor said just over $1.1 billion was owed to the regular budget and about $1.7 billion for peace-keeping.

Another correspondent asked about the $4 million which had been stolen from the United Nations peace-keeping mission in Somalia. Mr. Connor said the investigation into the theft had been very thorough. Scotland Yard investigators had not been able to identify the perpetrators of the crime. The investigation was continuing.

Asking for clarification on the figures presented today on the amount owed by the United States, a correspondent noted that earlier in the year the United states arrears had been estimated at about $1.5 billion, which would now decrease to about $1.3 billion with the expected payments. Although the total amount owed to the Organization would decrease because of the proposed payments by the Russian Federation, the United States would then owe a larger percentage of the total arrears. Mr. Connor agreed with that interpretation and added that the Russian Federation would be substantially out of an arrear situation. However, the United States arrears would decrease by about $200 million or $300 million, because of their expected contribution this year, plus some new assessments for peace-keeping that would be added by the end of the year. For that reason, its arrears would only decrease from $1.5 billion to about $1.3 billion.

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