PRESS BRIEFING BY UNDER-SECRETARY-GENERAL FOR MANAGEMENT

Press Briefing

PRESS BRIEFING BY UNDER-SECRETARY-GENERAL FOR MANAGEMENT

Under-Secretary-General for Management Joseph E. Connor, briefing correspondents on the United Nations financial situation this afternoon, said that if he were asked to sum up the situation of the past few years, he would recall words from a well-known nineteenth century humorist: "always live within your income, even if you have to borrow to do so". That was what the United Nations had been doing. "We have no capital, we have no reserves, we borrow from some Member States when other Member States don't give us the income we need", he said.

However, he said, for the first time in a long time there were positive, although small, changes in the three indicators used to measure the Organization's financial situation, he said. At year-end 1998, total combined cash was higher -- $736 million; unpaid assessments were lower -- $2.031 billion; and amounts owed to Member States for troops and contingent-owned equipment were down to $872 million.

When the total cash figure was disaggregated, so regular budget and peacekeeping cash were shown separately, some worrying trends became apparent, he said. Peacekeeping cash was down from $923 million four years ago to $768 million at the end of 1998. What saved the situation was that the deficit in regular budget cash was lower also. At the end of 1995, there had been a negative regular budget cash position of $195 million, while at the end of 1998, the deficit was only $40 million.

The large deficit in peacekeeping cash followed on lower peacekeeping assessments, he continued. Peacekeeping assessments had been more than $3 billion in 1994 and 1995, and decreased to about half that amount in 1996. More recently they had declined to $900 million and in 1999 were projected to come to only $650 million. The regular budget assessment pattern, while relatively stable, had declined over the past five years.

The deficit forecast for the end of last year was negative $50 million, he said. The actual 1998 figure of negative $40 million was much less than any of the last three years.

Two factors were primarily responsible for the improved cash position at the end of the year, he continued. First, the United States had made a significantly larger regular budget cash payment in the final quarter of 1998 than in earlier years. In fact, its regular budget payments had come to 119 per cent of its regular budget assessment for 1998 while the corresponding figure for all other Member States had been 99 per cent. The United States had reached that 119 per cent not because it had legislated a greater appropriation, which it had not done, but rather because its national legislation had permitted more prompt payment of appropriated amounts.

Should the major contributor in future years revert to its previous pattern of paying a large portion of its assessments in the year following assessment, then the regular budget cash deficit would again rise, he stressed. In 1995, the United States had paid about half of what it was assessed. It had "made a major comeback in 1998 and marginal differences in 1996 and 1997".

The second trend emerging in 1998, was that by the end of the year, 117 Member States had paid their regular budget assessment in full, for every year all the way back, he said. That number compared to 100 last year.

As a result of those two developments, the series of large deficits in regular budget cash had been broken in 1998, and the need to cross-borrow substantial amounts from peacekeeping cash to fund the shortfall in the regular budget account had greatly subsided, he said. That was just in time, given the diminishing amount of peacekeeping cash available to borrow from and the fact that the future availability of peacekeeping funds for cross-borrowing was becoming increasingly doubtful.

While peacekeeping assessments were declining sharply and regular budget assessments were stable, assessments for the International Tribunals for Rwanda and the former Yugoslavia were increasing due to increased activities and full assessment for them as of 1998, he said. Assessments for them had come to $27 million in 1995, but would be some $155 million in 1999.

While the level of unpaid assessments was down at the end of 1998, the change had only been from $2.062 billion in 1997 to $2.031 billion in 1998, he said. But improvements in regular budget cash collections had not been seen in assessments for peacekeeping or the Tribunals.

Despite continuing high level of aggregate unpaid assessments, the level of unpaid assessments for the regular budget was decreasing substantially, he said. These were down from $564 million in 1995 to $417 million at the end of 1998. The United States unpaid assessments had fallen by $98 million while the combined total of all other Member States was down by $49 million. At the end of 1998, the United States accounted for 76 per cent of all unpaid regular budget assessments, Brazil 7 per cent, and 66 Member States accounted for the remaining 17 per cent.

Peacekeeping arrears at the end of 1998 came to $1.594 billion -- about $20 million more than the previous year, he said. Unpaid peacekeeping assessments had increased by $36 million for the United States, and by $2 million for Ukraine, but the Russian Federation had made payments of $10 million. As for the two Tribunals, unpaid assessments at the end of 1998 came to only $20 million, but that was $6 million more than a year ago. The level of unpaid assessments had become intractable.

Connor Briefing - 3 - 18 March 1999

Turning to the level of debt owed them for troops and contingent-owned equipment -- a matter "dear to the hearts of Member States" -- he said $872 million was owed at the end of 1998. That amount was virtually the same as in the two previous years, despite the fact that the level of peacekeeping had decreased from $1.4 billion to under $1 billion.

At the start of the year, debt for troops and contingent-owned equipment had totalled $884 million, he continued. New obligations came to $204 million. In keeping with the Secretary-General's confirmed intention to not allow the aggregate debt for troops and contingent-owned equipment to rise, most of those new obligations had been reimbursed. Additionally, a downward revaluation of equipment debt of $34 million had been made. The year-end debt totalled $872 million. At the current rate, and without significant collections from Member States long delinquent in meeting their obligations to the United Nations, the Organization would be unable to eliminate its debt to Member States.

As of 31 January 1999, 32 Member States had paid their regular budget assessments for 1999 in full, compared with 24 Member States a year earlier, Mr. Connor stated. By the end of February, 49 Member States had paid in full -- 10 more than on that date in 1998.

Overall, the United Nations experienced a consistent cash pattern, he said. The negative cash position started in August, with worsening deficits in October and November, followed by some abatement by year end.

In preparing the forecast for the end of 1999, the major unknown variable was the amount to be received from the United States following its anticipated national legislation for its fiscal year, which began on 1 October, he said. When preparing forecasts for year-end cash, the Secretariat had historically included only projected payments that had already been legislated. Therefore, no payments by the United States after 1 October 1999 would be included in the forecast amounts. While that scenario was highly unlikely, if it did occur, the regular budget cash amount on 31 December 1999 was projected to be a negative $246 million.

But there were two alternative scenarios, he continued. Scenario 2 projected year-end regular budget cash by stipulating that the United States would make an end-of-year payment similar to that made in 1998: $197 million. The regular budget cash deficit would then be around $46 million. The third scenario would have the United States, in the last quarter of 1999, reduce its obligation to the Organization to the equivalent of two years' outstanding assessments. In that case, a regular budget cash surplus would be likely. If the United States paid more than what was needed to avoid the sanctions of Article 19 of the United Nations Charter, the Organization would end up for the first time in many years "on the plus side", with a positive balance. "Stay tuned for the outcome", he said.

Connor Briefing - 4 - 18 March 1999

Forecasting for peacekeeping operations was more difficult than for the regular budget, he said. For example, 1999 assessments had had to take into account, at the last minute, the Security Council's decision not to renew the mandates of the United Nations Observer Mission in Angola (MONUA) and the United Nations Preventive Deployment Force (UNPREDEP). The current forecast was that peacekeeping assessments through 1999 would total about $650 million, compared to $907 million in 1998. Working with unpredictable variables, he anticipated that available cash, coming to $768 million at the start of the year, would be about $738 million at the end of the year, as a result of falling assessment levels.

He then made projections for combined cash balances at year-end 1999 based on the above-mentioned three scenarios. If the Organization received cash for which national legislation existed, combined cash at year-end 1999 was projected to total $492 million. If, as in scenario 2, it received the same level of payment as it had in 1998 from the major contributor, combined cash was projected to total $692 million. If estimates included amounts to prevent application of Article 19, combined cash would be higher than any recent year-end amount.

Summing up, he said recent improvements included smaller regular budget cash deficits at the end of 1998, and less cross-borrowing from peacekeeping cash. The unstable conditions were: lower available peacekeeping cash; the unknown level and timing of the United States payments; larger arrearages in assessment collections; and debt to Member States for troops and equipment that could not be liquidated. The important thing, he stressed, was that those unstable conditions were holding the United Nations financial situation hostage.

When a correspondent asked whether the United States would avoid falling under the sanctions provided for in Article 19 of the Charter if it paid the same amount in the last quarter of 1999 as it had in that quarter of 1998, Mr. Connor said that the 1998 final quarter payment would not suffice. The United States had paid some $197 million in the last three months of 1998, which allowed it to avoid losing its General Assembly vote by reducing its debt to less than the value of the previous two years' regular assessment.

Collaboration of both sides of the United States House of Representatives last year resulted in a payment of that $197 million, he added. That put the United States slightly on the "sunny side" of Article 19. But they must pay considerably more between 1 October 1999 and 31 December 1999 to avoid Article 19 sanctions this year. The United States Congress had already initiated discussions on the matter. There had clearly been a focus in recent years on establishing exactly how much was required to avoid sanctions, but it was too early in the year to accurately establish the figure for 1999. It could be estimated within ranges, but because there was no certainty as to what the peacekeeping assessment would be and that assessment

Connor Briefing - 5 - 18 March 1999

was a major factor, it could not be established precisely. For his analysis, he had taken a conservative view.

Asked whether scenario 2, whereby the United States paid the same in the last quarter of 1999 as it had in the last quarter of 1998, assumed that the United States would lose its vote, he said this would be the outcome. If scenario 2 came to pass, and the Organization reached minus $46 million regular budget cash, then the United States would not have paid enough to avoid Article 19 sanctions. The United States must pay at least -- "underline it" -- $250 million and probably more to avoid losing its vote.

This, he explained to another correspondent, would be $250 million in addition to payments made up until September 1999 under legislation that had already been passed. The remaining $100 million of the prior years amount that the United States had already approved for payment had been benchmarked. That amount had been delayed under the legislation and conditions had been placed on when it could be paid. Half could be paid in March and the other half later in the year. The United States national legislation also required certification by the Secretary of State before either of the two halves could be paid, so there was a question mark on both those payments, but in establishing scenarios 1, 2 and 3 he had presumed that whatever restrictions were there under the national legislation would be satisfied and the disbursement would be made by 30 September 1999. If these two payments came, they would come before 1 October.

How much the United States owed was growing, as a percentage, compared to how much was assessed in the two most recent years, he continued. Aggregate assessments in 1999 would be much lower than in 1998 and much lower than in 1997. It was the assessments from 1995 and 1996 -- when assessments were very high -- that were largely unpaid by the United States. The formula was working so that for at least the foreseeable future in each year more would be required than in the previous year to avoid Article 19 sanctions. The United States had no concerns about Article 19 in earlier years because the ratio was going the other way, but it began to turn last year.

Very careful attention had been paid to that by the people from the United States Mission, he said. Last year they had been fully informed as to what the number was, as he expected they were today to the extent that it could be projected.

Asked to explain how important it was to the United Nations that the United States paid off its debt, Mr. Connor said that the major component of the United States' debt was money owed for peacekeeping. It owed slightly more for peacekeeping than the amount owed by the United Nations to the 70 or 80 troop and equipment providing countries. Those countries were not going to be paid until the arrears were collected.

Connor Briefing - 6 - 18 March 1999

It was not just the United States that owed peacekeeping arrears, he added. The United States, Ukraine and the Russian Federation together accounted for nearly all the peacekeeping arrears. If those three Member States paid up in one fell swoop, all the debt the United Nations had carried unchanged for five or six years could be paid. It was a one-to-one relationship. Fortunately for the Secretary-General, those Member States owed money had been willing to forego payment for some years. They were obviously disturbed about it and it was a constant subject of conversation in all United Nations committees. But until the arrears were paid, primarily by the three countries he had mentioned, the United Nations could not liquidate that intractable level of past debt for troops and equipment.

In all, the United States owed about $1.6 billion, he said in response to a correspondent's question. About $1 billion was for peacekeeping and the other $600 million was equal to about two years' assessment for the regular budget. That number had remained unchanged for several years.

In the first two months of this year, the United Nations collected about $88 million more than it had in the same period of the previous year, he said in answer to another question. A large number of Member States had paid in full in those months. It was also useful to look at which countries had paid. Many, such as Australia, Canada, France, Italy, Netherlands, Russian Federation, Belgium and Sweden, were responsible for more than 1 per cent of the budget. In addition, half a year's payment from Germany and the United Kingdom had been received. The Russian Federation had paid in full. In all, the United Nations had received about 30 per cent more cash in the first two months of this year than it had in the first two months of 1998.

Clearly, Member States were rallying to the Secretary-General's call and were trying to make up what they had not paid in earlier years or to accelerate their payments, he continued. This was a visible trend, and the United States had joined that trend by paying 119 per cent of last year's regular assessment. It was important to see that circumstances had changed, and they were evolving in 1999. However, it would take until the last 90 days of the year to see how the play would turn out.

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