FINANCIAL STABILITY OF UN ‘UNDER PRESSURE’, SAYS UNDER-SECRETARY-GENERAL FOR MANAGEMENT, IN BIANNUAL STATEMENT TO BUDGET COMMITTEE

Fifty-eighth General Assembly

Fifth Committee

7^th Meeting (PM)

FINANCIAL STABILITY OF UN ‘UNDER PRESSURE’, SAYS UNDER-SECRETARY-GENERAL

FOR MANAGEMENT, IN BIANNUAL STATEMENT TO BUDGET COMMITTEE

“The financial stability of the Organization is under pressure”, Under-Secretary-General for Management Catherine Bertini told the Fifth Committee (Administrative and Budgetary) this afternoon, as she delivered her biannual statement on the financial situation of the United Nations.

Describing the lack of predictability in payments by Member States to the budget of the United Nations, she said receiving payments meant that the work of the Organization could carry on, while their absence undermined that ability.  “We must be able to rely on payment in full and on time, to provide the predictable resource base needed to carry out all our mandated activities”, she stressed.

She informed the Committee that, as of 30 September, only 113 Member States (59 per cent of the membership) had paid their regular assessments in full.  Since then, only 6 other countries had made full payments, bringing the total today to 119.  As of the end of September, 78 Member States had not met their financial commitments for the United Nations regular budget, including 36 countries that had made no payment whatsoever in 2003, and another 42 that had made only partial payments.

Historically, she explained, the Organization’s financial health was judged by three baselines:  unpaid assessments; cash on hand; and debt owed to Member States.  Underlying those elements and tying them together was the adequacy of annual assessment levels and actual payments against those assessments.

Unpaid regular budget assessments amounted to $693 million, she continued.  Of the Organization’s 15 major contributors, 3 owed a total of $581 million, 75 others owed $112 million.  For the month of October, cash availability under the regular budget and related reserve accounts had become critical.  Having no regular budget cash, the Organization had had to borrow from peacekeeping accounts to fund the regular budget.  It would have to borrow as much as $125 million at the end of November.  Such a situation was forecast to last until some expected payments were received.

A regular budget contribution of $31 million had been received from the United States earlier this year, and that major contributor had informed the United Nations that payments of between $233 million and $341 million would be received by the end of December, depending on action by Congress on the country’s current national budget.  Based on those figures, two scenarios had been prepared for the financial position of the Organization at the end of the year.  Should the lower contribution be received, the United Nations would face a negative balance of $5 million for the regular budget.  With the higher number, the year-end cash balance would be a positive $103 million.

Regarding aggregate assessment levels for 2003, which comprise amounts applicable to the regular budget, the Tribunals for Rwanda and the former Yugoslavia, peacekeeping and the Capital Master Plan, Ms. Bertini said that the Organization was moving back up to previous high years with an aggregate assessment level of $3.9 billion, as at 30 September 2003.  That could increase to over $4 billion, if an additional peacekeeping assessment was approved for the mission in Liberia.

Turning to the two International Tribunals, she said that “their story is not good”, as most Member States had not paid their 2003 Tribunal assessments in full.  In fact, at 30 September, 116 Member States had made no payment for 2003, while 15 had made only partial payments.  Only 60 Member States have paid their 2003 assessments in full for both Tribunals.  Unpaid amounts for the Tribunals had reached $117 million at the end of September, while at the same time last year, only $49 million had been unpaid.  Five of 15 major contributors owed a total of $102 million, and 126 others owed $15 million.

The Tribunals’ cash balances at the end of October were forecast to fall to a negative $41 million, she continued, and they were projected to end the year with a shortfall of $29 million -- a far cry from the initial forecast of a positive $2 million.  Those persistent shortfalls highlighted the fragile financial position of the Tribunals and the need to borrow substantially from peacekeeping operations.

As for a $25.5 million 2003 assessment for the Capital Master Plan, she said that, as at 30 September, total receipts had amounted to $15 million, reflecting payment from 61 Member States.  One hundred twenty-seven Member States had made no payment whatsoever.  Since then, five additional payments had been received, bringing the total number of Member States fully paid up to 66.

Turning to peacekeeping, she said that it seemed to be a better story, but only on the surface.  The first good part of the story concerned outstanding peacekeeping assessments, which at the end of September totalled some $1.56 billion, compared to some $1.78 billion on 30 September 2002.  As of 30 September, the United States owed $732 million, and 14 other major contributors owed $464 million.  Yesterday, a contribution of $252 million had been received from the United States against its peacekeeping assessments, thus lowering the country’s outstanding amount.  That was a positive trend, especially when this year’s higher peacekeeping assessment was considered.  Another good part of the story concerned the cash flow for peacekeeping, which showed healthy balances for each month of the year.  It was projected to be over $1.2 billion at 31 December.

However, not all of that cash was available for cross-borrowing.  With closed peacekeeping missions remaining the only available source of cash, minimal amounts were left to cover the deficits in the regular budget and the Tribunals.  Some $84 million had been returned to Member States from closed missions in June this year, and another $84 million was due to be returned next March.  If that happened, it would not be possible to cover the shortfalls.  As for the Peacekeeping Reserve Fund, it had already been used twice in the past six months to fund the start-up of two operations.  The “level of cushion” for 2004 was clearly insufficient.

Total borrowings from the closed missions this year stood at $187 million.  Against that level, if there was only $42 million available next year, “we are clearly skating on thin ice”, she concluded.  Not only could the United Nations ill-afford to pay the $84 million next March, but it was counting on a marked improvement in receipts for the Tribunals and the Regular Budget, in order to fund mandated operations.

Notwithstanding that situation, the Organization was continuing to follow the Secretary-General’s plan to remain as current as possible with reimbursement to Member States for the use of their troops and equipment.  To date, $339 million had been paid in troop costs and the Organization planned to pay another $64 million by year’s end.  The United Nations had also paid $329 million for contingent-owned equipment and planned to pay $100 million more by the end of the year for a total payout of $832 million.  The level of debt at year’s end was expected to total $565 million.

While progress had been demonstrated this year, the timely signing of memoranda-of-understanding continued to be a problem, as did the shortage of cash in a number of active missions, including United Nations Interim Administration Mission in Kosovo (UNMIK), United Nations Mission for the Referendum in Western Sahara (MINURSO) and United Nations Peacekeeping Force in Cyprus (UNFICYP), which delayed reimbursements.

In conclusion, she expressed her appreciation to those Member States that had lived up to their treaty obligations and had paid all assessments in full and on time.  They were:  Australia, Canada, the Democratic People’s Republic of Korea, Germany, Kuwait, Monaco, New Zealand, Norway, Slovakia, South Africa, Sweden, Switzerland and the United Kingdom.  The Secretary-General saluted each of those countries and once again called other Member States to meet the financial obligations that they had approved many months, and in some cases years, earlier.

The Committee will meet again at 10 a.m. Thursday, 23 October.

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