PRESS BRIEFING BY USG FOR ADMINISTRATION AND MANAGEMENT

22 May 1997

Press Briefing

PRESS BRIEFING BY USG FOR ADMINISTRATION AND MANAGEMENT

19970522 FOR INFORMATION OF UNITED NATIONS SECRETARIAT ONLY

Joseph E. Connor, Under-Secretary for Administration and Management, told correspondents at a Headquarters press briefing yesterday afternoon, 21 May, that there had been no real change in the United Nations financial situation in the last two years and that the Organization continued to be on the edge financially.

Regarding the overall financial picture, Mr. Connor said cash balances continued to be erratic, the timing and amount of inflows continued to be unpredictable, uncollected assessments continued to hover at precarious levels and the Organization continued to be unable to pay its bills on a timely basis.

At any time during the past two years the United Nations had about one year's assessment uncollected, Mr. Connor said. At any time during the past two years, it had debts payable to Member States which hovered near $900 million. Until uncollected assessments changed, the United Nations would not be able to see change in the amounts owed to Member States. One group of Member States may be at the point of persistently, perhaps permanently, financing the assessments owed by a second group of Member States.

Speaking on the regular cash situation, Mr. Connor said as of 30 April, the Organization had collected a total of $637 million for the regular budget, a little over half of the 1997 assessment bill, compared to $595 million in 1996 and $584 million in 1995. There was actually, however, a fall off in the number of Member States paying current year assessments in full. Only 54 Member States had paid in full by 30 April, compared to 56 in 1996 and 39 in 1995. The increased amount collected in 1997 was largely the result of arrearage and partial payments. The largest regular budget contributions received by 30 April, ranged from a contribution of $100 million from the United States to $7.7 million from Denmark. There had also been a number of sizeable payments after 30 April. Japan had paid the balance of its 1997 contribution on 7 May; if that sum had been received a week earlier, Japan would have placed at the top of the list with $167 million. Also, full payment of $45.5 million was received from the Russian Federation in May. As for 1997, the Organization estimated regular budget cash collections of $1.2 billion in 1997 compared to $1.2 billion in 1996 and $1.1 billion in 1995.

At the end of April, Mr. Connor continued, the usable cash balance of the General Fund (the regular budget and related reserve funds) totaled $92 million, which was less than the amount needed for one month of regular budget expenditures. That amount was better than end April 1996 when cash balances were only just over $7 million. Current projections anticipated that the

Organization would be in a negative position for four months, with a maximum level of borrowing of $275 million at the end of November and an end-of-year negative balance of $201 million. Those latest projections were based on informal contacts and past payment patterns and depended on the receipt of contributions from a number of Member States.

Regarding peace-keeping cash projections, Mr. Connor said the Organization currently expected that disbursements would exceed receipts in six of the coming eight months of 1997. For the whole year, it was projected that total disbursements would exceed receipts by $240 million. The projection reflected expenditures under the liquidation phase of several peace-keeping missions, including the United Nations Peace Forces in the former Yugoslavia (UNPF), United Nations Assistance Mission for Rwanda (UNAMIR) and the United Nations Operation in Mozambique (ONUMOZ), which were not balanced by corresponding assessments. It also reflected the application of some of the accumulated credits in respect of the unencumbered balances of peace-keeping missions, the application of which the General Assembly had earlier delayed.

The projected level of unpaid reimbursements to Member States at the end of 1997 was estimated at $829 million, he continued, and that amount would be only marginally lower than the current amount of $845 million at the end of 1996. The Organization projected that by the end of 1997, peace-keeping cash would fall to $634 million. That compared to estimated amounts owing of $829 million to Member States, a gap of almost $200 million. That gap, which closed in 1996 when the Russian Federation paid some $200 million in arrearage, had now widened again in 1997. That was a financial red flag, particularly, since on hand peace-keeping cash was dramatically lower in 1997 than in prior years.

Concerning the Organization's combined cash position, Mr. Connor said it was expected to be $433 million, which would cover barely two months of expenditures at average monthly rates now projected for 1997. The combined cash position would reflect a regular budget cash deficit of $201 million and a peace-keeping positive balance of $634 million. With no reserves and no capital to shore it up, the Organization's precarious situation became even more unstable. While the December figure was bad, the November projection of combined usable cash left the United Nations with only just over $300 million, or roughly six weeks requirements at average 1997 expenditure rates.

The precarious financial situation of the United Nations came down to the question of arrears, Mr. Connor said. The Organization was totally dependent on the prompt payment of assessments for its financial health. At the end of April, prior years' outstanding contributions for peace-keeping totalled $1.4 billion. Of that amount, major contributors owed $1.261 billion or 88 per cent with the largest contributor owing the largest amount at $839 million. All other Member States owed $168 million or just 12 per cent. As

USG Connor Briefing - 3 - 22 May 1997

for the regular budget arrears, of the 15 major contributors only three had an arrears position at 30 April 1997. The combined amount for the other 170 Member States totaled $68 million or just 19 per cent of the total.

To sum up, Mr. Connor said the non-payment of those outstanding contributions was jeopardizing the financial health of the Organization, especially as receipts for peace-keeping accounts declined. The financial health of the Organization was deteriorating.

A correspondent asked Mr. Connor's reaction to the story in yesterday's The New York Times regarding members of the United States Congress wanting to change conditions for the payment of its arrears. Mr. Connor said the Secretary-General had been very encouraged by the reception he received during his January trip to Washington. He had also been encouraged by the reception afforded the release of his "track one" and "track two" reforms and by the promise that they would be reviewed when they were placed before all Member States in July. What he had read today suggested that there would be less money, slower payment and more conditions.

The same correspondent asked what would be the effects if the United States did not pay its arrears. Mr. Connor said the financial continuation of the Organization depended on the continued willingness of 80 Member States to finance those who had not paid their assessments.

Asked if the United Nations could survive without payment by the United States, as long as the other Member States made additional contributions, Mr. Connor said that there were problems when 25 per cent of financing for the regular budget was missing. Those problems had been solved temporarily by engaging in the imprudent financial practice of borrowing from the peace- keeping account, which was made possible by the tolerance of Member States who had foregone payment. That debt was $900 million dollars.

What were some examples of important projects which were not funded due to the current financial situation? a correspondent asked. A number of illustrations had been given in the past relative to peace-keeping, including a failure to be able to field a force for Rwanda, Mr. Connor said. There were also a number of illustrations of measures Member States would like the United Nations to take but never requested because the financing was not there. For example, large requests had been made by both International Tribunals for additional financing, and moderately large requests had been made by the Secretariat on behalf of the tribunals to the Advisory Committee on Administrative and Budgetary Questions (ACABQ). In the opinion of the prosecutors they did not have enough money. The Secretary-General had hoped that all Member States would judge progress on reform by first accepting his benchmarks and then his report on how well he met those benchmarks. It did not seem to be going that way with at least one major contributor.

USG Connor Briefing - 4 - 22 May 1997

Asked if the Russian Federation had paid its contributions in dollars or in its own currency, Mr. Connor said the United Nations had received the Russian Federation's contributions in dollars.

When did you really feel there would be no more borrowing from peace- keeping? a correspondent asked. Mr. Connor said one scenario could have the Member States instruct the Secretary-General to cease borrowing. The next time he would have to borrow was in August, and if borrowing was precluded, then the regular budget would not be funded anymore, and everybody would stop working. In a second, more realistic scenario, the peace-keeping account would continue to decrease to some $500 million or $600 million in the coming year, and then there would not be any fund from which to borrow.

About 25 countries paid 91 per cent of the contributions, a correspondent said. With the exception of the United States, had those other 25 paid? Mr. Connor said that at the end of 1996, only three of the 25 -- Brazil, Ukraine and the United States -- had not been current.

Asked how members of the General Assembly's Fifth Committee (Administrative and Budgetary) had reacted to his presentation, Mr. Connor said there had been a recognition that things were getting very tight. And that was not a good inducement for the current negotiations being carried out by Member States on the scale of assessments and other sensitive topics. The Fifth Committee continued to rightly emphasize that the problem was cash flow and the collection of arrears.

Asked about the Secretary-General's budget which would be released in July, Mr. Connor said he would be giving a briefing on the "preliminary" budget for 1998-1999 in the next several days. The budget would be revised in July to take into account additional reform measures that the Secretary- General would put in place. The proposed budget would show that the Organization had come close to suppressing 1,000 posts and that it had achieved a negative nominal growth budget, reducing real resources enough to cover inflation and exchange. He said he would like to see other governments actually reduce expenditures.

A correspondent asked if 1,000 jobs had really been suppressed. Mr. Connor said the Organization was very close to that number. It was awaiting the revised estimates in July, and the Secretary-General saw no particular difficulty in suppressing a total of 1,000 posts at that time.

USG Connor Briefing - 5 - 22 May 1997

Asked about real resource reduction, Mr. Connor said the real resource reduction in appropriations was exactly as it was in the outline, but inflation had been added. The Organization achieved a real resource reduction in 1996-1997, compared to 1994-1995, of $154 million dollars, and it had added about $150 millon for inflation. Meaning that costs were cut by $154 million. Inflation was exaggerated in the budget because it was a two-year budget, and that was why it always appeared larger than what it should be.

To sum up, he continued, the Secretary-General was moving in exactly the way he said he would. He was meeting his goals "right on the nose". It was disturbing that although the Secretary-General had announced that he would have revisions and changes in July, some parties, as he read in the story in The New York Times, were not waiting for the revisions to see the whole picture.

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