PRESS BRIEFING BY UNDER-SECRETARY-GENERAL FOR MANAGEMENT

Press Briefing

PRESS BRIEFING BY UNDER-SECRETARY-GENERAL FOR MANAGEMENT

The financial state of the United Nations was precarious and that forced it to resort to financial practices that were imprudent, said the Under-Secretary-General for Management, Joseph Connor, during a Headquarters press briefing today.

The briefing on the financial situation of the Organization followed the Under-Secretary-General's presentation on the same topic before the Fifth Committee (Administrative and Budgetary) on Tuesday, 6 October.

Mr. Connor said that current unpaid assessments totalled more than $2.5 billion and were stubbornly resistant to collection. That situation was the primary cause of a regular budget deficit that could grow as high as $247 million by the end of 1998. Also, money allocated for peacekeeping operations was steadily declining and was expected to be approximately $775 million by year's end -- the lowest amount in five years. The total combined cash balance could fall to a low of $528 million by year's end.

"Our earlier negative projections continue to be borne out," he said. "We continue down the slippery slope."

The collection of unpaid assessments was the bedrock of United Nations financial stability, he said. There was no other source of funds with which to maintain the Organization or carry out its mandates. However, the United Nations record for collecting assessments was not good. The major contributor, the United States, accounted for 67 per cent of the amount currently owed to the Organization, which was true despite the fact that the United States had already paid $228 million this year.

As for cash available, the United Nations began the year with a deficit of $122 million. That negative amount would have been even worse if there had not been underspending in 1996-1997. Due to the timely payment of assessments, the regular budget deficit was eliminated from January to July, but it returned in August. Due to the uncertainty of United States payments, the deficit was predicted to return in the months of October, November and December.

His budget projections included $150 million from the United States, he said. An additional $197 million, which the United States expected to pay, might not materialize, because there was no legislation in place to approve such a payment. Without such legislation, he could not plan on receiving that payment by year's end.

Such underpayment by the United States helped explain why the United Nations suffered from chronic year-end deficits, he added. In 1995, the United States paid only 48 per cent of its assessment. Unless the United

Connor Press Briefing - 2 - 7 October 1998

States made up for the 1995 shortfall, the Organization would be in a deficit for its regular budget every year.

In order to address the regular budget deficits, the Organization was forced to borrow money from its peacekeeping operations, he said. However, the amount of cash for peacekeeping was expected to drop, from $844 million in September to $775 million by year's end. By the end of December, 32 per cent of the peacekeeping cash would have to be borrowed to cover deficits in the regular budget. "The Organization needs to borrow more and more from a smaller and smaller source," he said.

On the amounts owed to Member States for troop and equipment contributions, he said that, by year's end, the United Nations would owe $864 million, compared with $884 million last year. Every effort would be made to pay this year's incurred costs in accordance with the Secretary-General's stated goals.

He said he was often asked how long could the financial situation continue. The answer was that as long as there was peacekeeping cash to borrow from and as long as Member States tolerated the non-payment of debt, the situation would remain. "The only pleasant prospect was the complete payment of all assessments in arrears by all Member States", he said.

He added that some explanation was necessary for the provisions of Article 19 of the United Nations Charter. Article 19 provided that if a Member State's arrears equal or exceed its contributions due for the preceding two years, it would have no vote in the General Assembly. The loss of vote was automatic unless the Assembly voted to grant an exception. In late November or early December, the Secretariat alerted those States that were in danger of losing their vote.

If the United States did not pay its expected assessment for the current year, would it be in danger of losing its Assembly vote? a correspondent asked. Mr. Connor said that the United States could lose its vote if it did not pay its expected assessment, which would total $347 million.

A correspondent asked when the Article 19 notification letter would be sent. Mr. Connor responded that letters would be sent in the last week of November or the first week of December.

What was the amount of unused peacekeeping funds for 1997? a correspondent asked. Mr. Connor said that, periodically a peacekeeping mission did not use all the funds allocated to it, generally when they were reducing their operations. In such a case, the unused money was refunded to Member States. About $160 million was unused, due to missions that were concluding and where the assessments had been more than the actual expenditures.

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