PRESS BRIEFING ON UN FINANCIAL SITUATION BY UNDER-SECRETARY-GENERAL CONNOR

The much-anticipated reduction in the level of debt to Member States might finally be achieved -- a major financial event for both Member States and the Organization, Under-Secretary-General for Management Joseph E. Connor told correspondents at a Headquarters press briefing this afternoon.

Presenting his statement on the financial situation of the United Nations, Mr. Connor said that delivery on the commitment by the United States to a prompt payment of $582 million was a major financial factor to be taken into in the 2001 projections he was presenting.  While no part of the $582 million had yet been received, the United States Mission had recently informed the Secretary-General that progress was being made towards full implementation of the arrangements reached in December regarding the scale of assessment and the payment of that country's arrears to the United Nations.  The United States Mission also stated that the legislative process would be quick and that "$582 million would be paid shortly".  "Of course it is up to them to comment further on their financial situation", Mr. Connor said.

Once the $582 million came in, he continued, the Secretary-General was determined that the whole amount would be used to pay down troop and equipment debt and would not be diverted for any other purpose.  The Secretary-General intended to immediately use a large portion of that amount to pay Member States for troops and contingent-owned equipment -- some $400 million in prospective payments had been so certified.  The remaining portion -- that is, $182 million -- would be paid when other pending claims had been processed and certified.

At the end of 2001, it was projected that outstanding debt for troops and contingent-owned equipment would amount to some $904 million, Mr. Connor said.  "If and when the United States remits $582 million, of course, we would apply  that payment against the $904 million and shrink the obligation to around

$322 million", he said.

For Member States, it would mean that a situation would abate that had gone on for too long, with one group of Member States financing the obligations of others, he explained.  For the Organization, major amounts of debt owed to Member States and major amounts of assessments long in arrears would disappear from the balance sheet.  That was a significantly improved financial picture.

Overall, the year 2000 had not lived up to more optimistic expectations,  Mr. Connor said.  In fact, the Organization had lost ground.  In 2000, all three components of the United Nations financial health were not as good as they had been a year earlier:  cash was down, unpaid assessments rose, and debt was at the $1 billion mark, some $100 million lower than in 1999.  Unpaid assessments exceeded the levels of the last four years -- over $2.2 billion.  Outstanding debt owed to Member States for troops and contingent-owned equipment also increased to $917 million, exceeding the levels of the last four years.

Regarding the cash situation, he said that in his last presentation in October 2000, he had discussed possible year-end scenarios, all of which depended on the level of regular budget payments that the United States might make by year-

end 2000.  The Organization was able to avoid deficits because of a late payment equal to its current full year's assessment from the United States, unlike the situation in 1995 through 1998, and the need to cross-borrow at year-end from peacekeeping funds to compensate for the regular budget deficit was, therefore, eliminated. 

Turning to the second component of the financial picture -- service requirements placed upon the United Nations by its Member States -- he said that the best expression of their extent was the level of assessments vote by Member States.  The aggregate assessment level for year 2000 went somewhat higher than originally forecast, reaching $3.4 billion.  While it was not the highest ever, it was closer to the peak levels reached back in 1994 and 1995.  It also far exceeded the 1999 level of $2.064 billion.

Regular budget assessments were $1.089 billion in the year 2000, he continued, and had remained constant.  There had been no growth over the entire 1994 to 2001 period.  In fact, regular budget assessment levels were lower by  $100 million than they were eight years before.  Assessments for the International Tribunals in 2000 were $166 million, somewhat above the previous year.  Peacekeeping assessment levels showed an erratic pattern:  very high amounts in 1994 and 1995; diminishing amounts each year from 1996 to 1999; and a very rapid rise in 2000.  The jump in total peacekeeping assessments was mainly due to assessments for four large peacekeeping missions:  United Nations Mission in Sierra Leone (UNAMSIL), United Nations Transitional Administration in East Timor (UNTAET), United Nations Interim Administration Mission in Kosovo (UNMIK) and the United Nations Organization Mission in the Democratic Republic of the Congo (MONUC).  All but MONUC had assessments over $500 million, and most were expected to exceed, in 2001, their level of assessments for 2000.

Noting a remarkable picture of solid progress, Mr. Connor said that, at year-end 2000, 141 Member States had paid their regular budget assessments in full for that year and all preceding years.  Of the Member States not fully paid up for the regular budget, the United States owed $165 million or 74 per cent of the aggregate unpaid amount.  Brazil owed $22 million, or 10 per cent, of the total amount.  Argentina owed $12 million, or 5 per cent, and 43 other Members States had outstanding amounts of some $23 million or 11 per cent.

At the end of 2000, peacekeeping unpaid assessments or arrears totalled some $1.989 billion, he continued.  The United States owed $1.144 billion or 58 per cent of the total outstanding arrears.  The real concern was that the amount due and unpaid was rapidly climbing.  The United States and Japan had markedly increased arrears at the end of the year.  Fortunately, several other Member States, principally the Russian Federation, had made significant efforts to pay down their long-outstanding debt.  France paid a substantial portion of its prior years’ outstanding contributions in early January.  Last week, Japan paid over $360 million, thus paying all of its arrears owed at 31 December 2000.

Another component of the Organization's financial health was debt owed by the Organization to Member States, he said.  The Organization began 2000 owing $800 million.  Most of that amount was for contingent-owned equipment.  A smaller amount was for troops.  At the end of 2000, debt to Member States was $917 million -- $117 million more than the amount owed at the beginning of the year.  During the year 2000, payments were completed to Member States for 1999 obligations and 1999 arrears -- $91 million and $71 million, respectively.

Actual obligations increased in 2000 (to $491 million), vastly outstripping an earlier projection of a total in obligations of $365 million, he said.  There was a downward revaluation of debt -- some $47 million -- that partially cushioned the effect of new obligations.  Payments to Member States of $165 million were made, which was about what had been anticipated.  Unfortunately, no arrears collections were received during the course of 2000 and, as a result, no additional pay down could be made in amounts owed to Member States.  Year-end debt was reasonably close to earlier projections.

Based on the current assessment of peacekeeping cash reserves, an additional post year-end payment in the amount of $100 million against the year 2000 obligation would be made shortly -- $66 million for troops and $34 million for contingent-owned equipment.  As a result of additional 2000 payments, debt to Member States would be reduced by another $100 million to $817 million.  For the first time in several years, the Secretary-General has not been able to fully pay to Member States new obligations incurred during the current year.

Offering projections for the year 2001, Mr. Connor said that daunting challenges remained.  Assessed contributions must provide a firm foundation for the Organization and for many of its core responsibilities.  Cash collections for the regular budget have been disappointing.  In 2000, 64 Member States had paid in full by the end of February.  In 2001, only 54 Member States have paid their regular budget contribution in full in the comparable period. 

The amount of payments received in the first two months of 2001 was also down, he said.  In 2000, by the end of February, $381 million had been received from Member States.  This year, the level of cash contributions actually paid totalled only $299 million, leaving the Organization some $82 million behind.  Several factors contributed to the decrease.  Several payments from major contributors were not received until March instead of February.  Another factor was the effect on cash flow of one of the transitional arrangements agreed to by the Member States when they took the decision to lower to 22 per cent the ceiling rate on assessments from 2001.

As a part of that decision, Member States other than the United States were asked to pay aggregate assessment amounts of about $31 million less than their net assessments for 2001, due to application of a promised additional payment of that amount by the United States against those assessments, he said.  While it was anticipated that the United States would make that additional payment, it had not yet been received.

He added that a number of large regular budget payments had been made in March, including a full payment of $12 million by Belgium and $51 million from Italy.  A number of large partial payments had been also made since January by Japan, the United Kingdom and Germany.

The projected 2001 cash balance was a positive figure, but showed a slight regression, Mr. Connor said.  Receipts were expected to peak at the beginning of the year.  It was expected that the two largest contributors, the United States and Japan, would pay the bulk of their regular budget contributions later in 2001.  As a result, periods of negative regular budget cash were expected, as was the need to cross-borrow from August onward.  "We expect to end the year with a positive cash balance, but it will be a close call", he added.

Peacekeeping assessments for 2001 -- currently projected at $2.6 billion -- were higher than their level of 2000 of $2.1 billion, he said.  Two out of five major missions may be assessed at levels higher than the year before.  The UNAMSIL had the potential for the largest increase -- possibly reaching some $800 million.  The UNTAET would follow at about $550 million.  Assessments for the missions in Kosovo, Bosnia and Herzegovina, and Ethiopia and Eritrea would be about the same level as 2000.  While it was not possible to project 2001 requirements for MONUC, it was likely that they would be substantially higher than for 2000, in which case the overall projection of some $2.6 billion could reach $3 billion.

Responding to questions on the United States assessment, Mr. Connor said that with the adoption of a new United Nations scale of assessment last year, the United States’ assessment rate had been reduced from 25 per cent to 22 per cent, thereby decreasing that country’s assessment by $31 million.  As a result of this change, the United States Senate early this year approved, by a vote of 99 to nil, the release of the $582 million under the Helms-Biden legislation.  However, approval by the United States House of Representatives is also required. 

On another question, concerning the cap of 25 per cent placed on its peacekeeping payments by the United States, Mr. Connor said that if the cap was not removed during the next year or so, the amount of United States arrears would increase by about $75 million a year.  The peacekeeping scale of assessment recently adopted by the General assembly resulted in a change in the United States peacekeeping assessment from 31 per cent to 28 per cent.  In the next three or four years, that would further reduce, approaching 25 per cent.  In the meantime, however, there was a gap of some $75 million a year, thus building up new arrears. 

The United States, he added, had a number of items that their national legislation precluded them from paying.  So even with the receipt of $582 million in arrears payment, there would still be some $600 million unpaid.  Most of that went back several years, when legislation enacted by the United States capped their contribution at 25 per cent.  All the discussion about removing the cap was to prevent that $600 million from growing any further. 

With regard to Ted Turner’s contribution, he said that he did not know whether the United States State Department had received the $31 million contribution, but the United Nations had not yet received it. 

Asked for an assessment of how other Member States felt about the slowness of the United States payment, Mr. Connor said that if he had presented his report two weeks ago, there would have been more discussion on how much was still owed by the United States.  However, the United States had issued a letter to all permanent missions explaining the United States legislative process and committing to disperse the $582 million soon.  That letter had not raised a question of whether or not they would pay, but rather when they would pay. 

As to whether the change in United States administration would affect the deal, he replied that many of the prospective members of the new administration had been consulted by the United States Mission.  They knew what was coming and agreed with it.  He had no concern about whether or not the new administration would support the decisions and the agreements worked out by the prior one.

With regard to Donald Trump’s offer to renovate the United Nations,

Mr. Connor said that he had explained in a letter to Mr. Trump the United Nations procedures and contracting requirements.  The “second year of activity” on restoring the complex had begun, in which a more comprehensive design would be put together using outside consultants.  The project management phase would cross all sectors ending up with the construction phase. 

The contractors must be different from the project management people, he said.  “It is fundamental to United Nations procurement that he who carries out the contracting doesn’t undertake the design and project management.”  That would be an inappropriate combination.  However, more money was needed before proceeding to the next phase.  The United States General Accounting Office was currently reviewing the project proposal submitted to the Fifth Committee.

Returning to a question on the practical implications of financially “losing ground”, Mr. Connor said that the Organization would be required to cross-borrowing from peacekeeping budgets to cover regular budget deficits, which was financially imprudent and tied up the Organization’s liquidity.  That was particularly true in years when peacekeeping escalated in size and there was a lot of money coming in. It would turn serious when peacekeeping assessments began to turn down and the Organization did not have new cash to pay old bills.  At some point, the tide would turn and the United Nations would have to use cash on hand to pay new bills.

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