PRESS BRIEFING BY USG FOR MANAGEMENT

Press Briefing

PRESS BRIEFING BY USG FOR MANAGEMENT

At a Headquarters press briefing this afternoon, United Nations Under- Secretary-General for Management Joseph Connor told reporters that lack of payments by Member States had put the Organization "on the financial brink, lacking both stability and liquidity".

Reviewing the preliminary update as at 30 September 1997 of the Organization's financial situation that he had earlier presented to the General Assembly's Fifth Committee (Administrative and Budgetary), Mr. Connor said the financial crisis had been caused by the late payment and non-payment of Member States. Recent events since he had last reported on the Organization's financial situation included the presentation of the Secretary-General's reform plan and the "magnificent" offer by Ted Turner to contribute $1 billion to United Nations humanitarian activities.

However, he added, neither held the immediate prospect or, in the case of the Turner contribution, any prospect at all of alleviating the Organization's financial situation.

He said late and non-payment had become a recurring practice of many Member States. That had led to continuing and persistent intervals of regular budget cash deficits, to increased borrowing from peacekeeping cash for regular budget purposes, and to debts accumulating to some Member States for troops and equipment.

At the end of September, he said, unpaid assessments had totalled $2.417 billion for the regular budget, peacekeeping and international tribunals. The major contributor accounted for 60 per cent of the total amount owed to the United Nations, while the next 14 principal contributors accounted for 28 per cent, with most of that portion owed by just two Member States. Outstanding contributions to the regular budget [not including peacekeeping and international tribunal contributions] amounted to $649 million at the end of September, and the largest contributor owed 77 per cent of that amount. The United Nations had so far this year received $972 million against regular budget assessments, but that included payment of prior years' assessments that had been paid during the current year. It was estimated that total cash collections in 1997 would be in the $1.150 billion range.

He said 1997 was forecast for the regular budget to end with a deficit of $272 million, having begun the year with a deficit of $197 million. From January through August 1997, the Organization had a positive cash balance as assessed contributions were received. The 1997 year-end deficit added to a pattern developing since 1995. In the years through 1994, the Organization had ended each year with a positive cash balance. Beginning in 1995, the magnitude of negative cash had increased, as did the number of months the regular budget was in deficit.

Peacekeeping cash, said Mr. Connor, was dwindling. "We had mentioned that this was going to happen; it now is happening in spades." Usable peacekeeping cash at the end of September aggregated $745 million, with a forecast to end the year with $670 million. Disbursements had exceeded receipts from May through August 1997, and would likely do the same in November and December. The United Nations was already in debt to Member States for troop and equipment contributions, and the Secretary-General would try to see that those amounts did not increase. Over the last several months, payments totalling $155 million had been disbursed to troop and equipment providers, and in the next few weeks an additional payment of $65 million was projected to be made. Whenever Member States remit substantial arrearage amounts, the Secretary-General intended to pay troop and equipment providers, which would total an estimated $907 million by the end of the year, up from $838 million at the end of 1996.

For 1998, he forecast a level of peacekeeping activity lower than 1997, hovering about the $1 billion mark. At that level of activity, troop and equipment requirements were expected to range between $220 and $250 million, and it was expected that collection of assessments would permit payments to Member States in 1998 of amounts in a similar range. Without significant arrearage payments, it was unlikely there would be a major pay-down of the accumulated troop and equipment obligation during 1998. One Member State had indicated that a substantial payment would likely be made, but since such payment required legislation to be passed, its timing was uncertain. The 1998 forecast therefore did not include any arrearage payments. "We would love to have them, but they are not yet in a position where we can count on them."

Another warning sign, he said, was that in most recent years, the combined cash amounts in the regular budget and peacekeeping funds had been less than the year before. At the end of this year the combined amount would total $398 million, about half the amount in 1995. High levels of peacekeeping cash would have to be held back to cover the regular budget cash deficit. It was not happy news, he said, adding that the picture was bleak.

A correspondent asked how a United States payment would alter the picture. "Significantly", replied Mr. Connor. With a $907 million troop and equipment debt, the Organization was in a position where current assessments could keep that about where it was, so a significant payment of arrearage would result in a big pay-down of troop and equipment debt -- dollar for dollar. Just as was done in 1996 when the Russian Federation paid over $200 million in arrearage payments, all of which was used to pay down the aggregate amounts owed to Member States. A correspondent asked Mr. Connor whether he could break down what proportions of the United States payment would go towards peacekeeping, regular budget and tribunal funds. He could not, he replied.

He was asked for an update on how the contribution of Ted Turner would come into the United Nations system. He said officials were trying to define the scope and depth of Mr. Turner's intention. Generally, it was described for humanitarian affairs -- children, refugees and landmine removal. Like any voluntary contribution, it was necessary to ascertain the particulars relating

Connor Briefing - 3 - 3 October 1997

to the wide spectrum. That work was going forward. "Obviously we are anxious to move it ahead, and he is too."

Would the money go into an existing fund? a correspondent asked. It would not, he said. There were a lot of different funds, but "nothing of this magnitude. Obviously, we are not going to commingle it with anything." Would there be a separate fund called -- a "Turner Fund"? the correspondent followed- up. He said the money would have to be accounted for very specifically. Mr. Turner had two stated objectives; his contribution was not a substitute for a Member State's assessments that remained unpaid, and it was not to be used for the United Nations bureaucracy.

Would the Secretary-General decide how the money would be spent? asked a correspondent. The Organization would use the funds for the intended purpose, replied Mr. Connor, and would be audited by the Board of Auditors to make sure that happened. The United Nations would abide by the donor's intentions in line with the organizations stated objectives. For clarification, a correspondent asked whether the United Nations would set up a trust fund for the disbursement of the Turner contribution. Mr. Connor said a trust fund would be established, as that was the only way the Organization could receive voluntary contributions from individuals. The fund would be defined with purposes according to Mr. Turner's intentions. Finding ways to spend it would not be difficult. "We will have more use for the money than we have money", he added.

Looking at the Under-Secretary-General's charts used in his presentation, a correspondent said it looked as though the United Nations would never again be able to afford to undertake peacekeeping operations. When would there be a meltdown, where it would no longer be possible to keep borrowing from peacekeeping funds? "We are having a meltdown in peacekeeping", he replied. The cash flow had dropped from $3.5 billion three years ago, to about $1 billion today. The Organization was sustained by the existence of peacekeeping cash that could be held back, and by the forbearance of Member States who were waiting for payments for troops and equipment.

When would it no longer be possible to keep the regular budget alive by borrowing from peacekeeping cash? the correspondent asked again. "When we don't have any peacekeeping cash to borrow", Mr. Connor replied. He could not anticipate when that would be, as it depended on the level of peacekeeping operations and payments by Member States. Those were two inexorably-linked variables. Asked what would happen when Member States paid their arrears, he said the Organization would then pay-down the troop and equipment providers. It was a definable circle, and the States owed such funds were very anxious to receive payment.

Asked about a change in estimates of expenditure mentioned in his presentation, he said it had not been significant. The budgetary picture of the Organization had been dramatically influenced by a change in exchange rates. Assessments had been sent out when the Swiss Franc was 1.18 to the dollar. It was now 1.45, and that was a big change.

Connor Briefing - 4 - 3 October 1997

A correspondent said the Advisory Committee on Administrative and Budgetary Questions (ACABQ) had issued a report saying United Nations reports submitted to parliamentary bodies had not been what they had asked for, and had given only what was already public information. Against this background, how did the Under- Secretary-General expect the reform proposals, which included a proposal to shift to results-based budgeting, would be received?

That was for the Member States to determine, he replied. Most Member States worked on results-based budgeting themselves, and were far less concerned with whether there were four P-3s or five P-4s than with what was achieved for the money spent. The Organization was following the lead of some Member States. Regarding the correspondent's reference to an observation of the ACABQ, he said the Organization had not submitted anything on results-based budgeting. That was a track II proposal; it was clearly indicated that it would have to be a partnership with Member States, both in the Secretariat and in capitals where they had hands-on experience, to devise ways in which that could be done.

The correspondent followed-up, saying that the ACABQ had asked repeatedly for information on programme performance, which had been one of the most difficult elements of the budget for them to capture. Mr. Connor said his Department had undertaken very serious reviews of programme performance. "We downsized the Organization by a thousand posts", while maintaining the same outputs. But there had never been a significant mandate identified that had not been completed. The ACABQ report did not include any indication that a mandate had not been carried out. The Committee had commented, fairly, about delays. Documents and meetings had been compressed, but all mandates had been performed. There was room for discretion in how things were done, and the Organization had tried to be more efficient, to use fewer people and to spend less money, but there had never been a question of non-fulfilment of mandates.

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