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

10 October 1996

Press Briefing

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

19961010 FOR INFORMATION OF UNITED NATIONS SECRETARIAT ONLY

At a press briefing yesterday, Under-Secretary-General for Administration and Management, Joseph E. Connor, provided correspondents information on the impact of the latest United States legislative developments on the United Nations current and projected year-end cash position. At the end of September, unpaid assessments due from all States totalled $2.7 billion. While it was a reduction of some $165 million from the position as of the end of August, it was still too high for the financial health of the Organization, he said.

On the regular budget's cash position, he said that, as of the end of September, the negative position had grown to $119 million. Outstanding dues then totalled $714 million, of which $398 million was for 1996 and $316 million for prior years. The United States owed 74 per cent of the total.

Turning to the issue of the United States, he said that following last April's approval of a national budget by that Member State for its 1995 fiscal year, the United Nations was advised to expect $304 million appropriated for the regular budget, by 30 September. The United Nations had received all the funds appropriated by the United States in its 1995 national legislation enacted last April. The recent United States law passed on 30 September had appropriated $313 million to pay for United States regular budget dues for 1996. The United Nations expected to receive $213 million of that by the end of December. The remaining $100 million was not expected until late January 1997, subject to certification by the United States Secretary of State that the United Nations had taken no action in 1996 to exceed its 1996-1997 budget of $2.608 million.

On the projections of regular budget cash flow, the Under-Secretary- General said that the Organization would end the year with a minus $103 million balance, down from the previous forecast of minus $243 million. The new minus $103 million forecast compared favourably with the negative figure of $198 million at the end of 1995.

Unpaid dues for peace-keeping operations totalled just under $2 billion as of 30 September, he said. He projected that peace-keeping cash would be $795 million by 31 December, a reduction of $71 million. For peace-keeping, the new United States legislation had appropriated $282 million for current assessments and $50 million for "arrears". But the payment of the $50 million "arrears" would be subject to the United Nations meeting three conditions, any two of which must be met in order to obtain certification. They are as

follows: further cost savings aggregating at least $100 million in the United Nations Conference on Trade and Development (UNCTAD), the regional economic commissions, the Department of Public Information (DPI) and in conference services; a cut in personnel by the end of 1997 that would at least equal 10 per cent of positions available on 1 January 1996; and the adoption of a 1998-1999 budget outline below $2.608 million as part of a five-year programme to achieve major cost-saving reforms in the United Nations and specialized agencies.

Apart from the new United States legislation on peace-keeping assessments, no significant changes had been made in other forecasts, he said. The United Nations still intended to pay $350 million to troop providers in 1996, with $279 million already paid. It would also make a special year-end payment of $275 million to troop providers, contingent on the receipt by year- end of the full $400 million expected from the Russian Federation in 1996 of which that country had paid $210 million. The payments by the United Nations would reduce to $700 million the sums owed to Member States for troop and equipment costs at the end of 1996.

Mr. Connor then forecast that the combined General Fund [a fund which includes the regular budget, the Working Capital Fund and the Special Account] would end the year with a deficit of $103 million, while the peace-keeping accounts would have a positive balance of $795 million. The combined cash position of the Organization would thus be $692 million. Despite the relatively healthier outlook for the regular budget, the Organization had had to borrow from peace-keeping accounts to continue with its basic work. Such borrowing would continue in 1997. Not only was that inherently poor financial practice, but the level of peace-keeping balances was likely to decline in the immediate future, depending on the level of new assessments to be approved by the Assembly. In addition, there was a clear danger that the financial crisis would continue diverting attention from and hampering efforts to reform the Secretariat. He said that $2.1 billion in dues would be owed to the United Nations at the end of the year, with some 65 per cent owed by the United States.

He added that the Secretary-General nonetheless appreciated all the efforts -- and particularly the recent efforts -- of Member States to reduce the amounts owed the United Nations. He continued to appeal to all Member States to emulate the growing number which had made such efforts to meet fully the obligations to the United Nations which they themselves had voluntarily undertaken.

Mr. Connor concluded his prepared remarks and turned to a series of questions by correspondents. By way of explanation to a question concerning the requirements by the United States on funds for the United Nations, Mr. Connor said that the United Nations had been advised that unless the United States Secretary of State could tell the American Congress that the United Nations had met certain conditions, the Secretary of State had no legislative approval by which to disburse the money. The conditions were imposed by the United States legislature on the United States Administration, he added.

As to the regular budget, one condition needed to be met, he said. The

United Nations must take no action to increase its current budget beyond $2,608 million. If it exceeded that amount, the United States could not disburse money to the Organization. As to peace-keeping, the United States had for the first time imposed conditions. They had imposed them, however, only on $50 million of potential payments called arrears. The others were unconditional -- $282 million for peace-keeping generally, and $20 million potentially available for African crises. Regarding the $50 million, the United States legislature said the Organization had to achieve two out of three tests. "Remember when you were in school with multiple choice. We have two out of three."

One of those conditions was that the 1998-1999 budget outline be below $2.608 million, he continued. The outline recently submitted by the Secretary-General was slightly below $2,608 million. The other condition concerned a reduction in United Nations personnel by the end of 1997 by 10 per cent below the number of positions at the beginning of 1996 -- amounting to 1,000 people. The third condition required that the cost of several United Nations activities -- UNCTAD, the five regional commissions, DPI, and conference services -- be reduced by $100 million. He pointed out that the budget outline which had already been submitted reflected zero nominal growth. To achieve that last condition, the budget would have to be reduced to below $2,608 million.

Asked how, if only 66 Member States paid in 1994, the budget position was that much better, Mr. Connor said it was because "the United States paid". The United States had for many years paid very close to its due date and paid in full. In the 1980s, the dates of payment slipped, but it was very strictly adhered to sometime in the early part of October. In 1994, payment was made in November, and "in 1995 it slipped off the map". He now had received the last of the 1995 payment in September of 1996. With 25 per cent of the assessed amounts, "that was a disastrous slippage for the Organization". That was the reason for seriously beginning to borrow at year-end 1995, to cover the deficit of $198 million. In 1996, while he expected to receive payments as late as last year, he now also anticipated to receive a larger payment than previously forecast which reduced the deficit to minus $103 million.

In a follow up question, Mr. Connor was asked whether the slippage was the result of the Republican-led Congress? He said that while the Congress had appropriated approximately its full regular budget assessment for 1995 -- payments were somewhat stretched out. The Administration had requested funding in full and on time. Clearly, when it had to resort to continuing spending resolutions, and no budget was voted, the amount of money being paid to the United Nations had been drastically reduced. The new legislation had since made up for 1995, but nothing had been done about 1994 and 1993. "It's slippage, and the slippage accelerated during the last two years." While recent legislation had provided sufficient funding for 1995 and now 1996, that could not be said for 1993 and 1994.

He reiterated that the United States had to judge whether the United Nations was meeting the congressionally imposed conditions. He pointed out, however, that as regards the three points specified in connection with the payments of $50 million for "arrears" that the Organization was in any case

substantially on its way towards meeting two out of the three. Asked which was the third condition, he replied those were cuts in UNCTAD and the other services mentioned, saying the budget had already been downsized to zero nominal growth. That meant, the Organization would have the same budget in 1999 in dollars, as it had in 1994. During that time, however, there would be inflation and changes in currency rates relative to the United States dollar which had not been provided for. He had already had to cut jobs and activities that added up to more than $600 million to achieve zero nominal growth.

Where was the financial crisis, really? a correspondent asked. Was that not a case of the books being manoeuvered, peace-keeping shifted around -- enough of a show through the November election of the Secretary-General? he added. Mr. Connor said that the evidence of the financial crisis was the juggling of cash -- it was like taking cash from one credit card to pay down the other. That was what he was doing. He had not had any regular budget cash since early July. His salary and that of Ms. Foa had been financed by taking peace-keeping cash earmarked for 17 missions. There was no excess cash in peace-keeping. In fact, there was a group of 90 Member States to whom $1 billion was owed. They were his creditors. That was financial manipulation. "Our balance sheet is like no other balance sheet you ever saw. Money is owed to us by one group of Member States, and we owe money to another group of Member States", he said. As long as those to whom the Organization owed money continued to not demand payment, he would have to borrow peace-keeping cash to keep the regular budget afloat. Now, that was a financial crisis, akin to "maxing out on your credit card".