PROPOSAL TO POSTPONE REPAYMENT TO MEMBER STATES OF CASH BALANCES FROM CLOSED PEACEKEEPING MISSIONS TAKEN UP IN BUDGET COMMITTEE

Fifth-eighth General Assembly                              

Fifth Committee                                            

34^th Meeting (AM)

PROPOSAL TO POSTPONE REPAYMENT TO MEMBER STATES OF CASH BALANCES

FROM CLOSED PEACEKEEPING MISSIONS TAKEN UP IN BUDGET COMMITTEE

As the Fifth Committee (Administrative and Budgetary) took up the administrative and budgetary aspects of the financing of peacekeeping operations this morning, many speakers agreed that, given the immediate cash needs of new and potential peacekeeping missions, the Organization had no recourse but to further postpone the repayment to Member States of the remaining 50 per cent of the cash balances from closed missions, which under the terms of General Assembly resolution 57/323 were to be paid by 31 March.

Addressing the implementation of that resolution, the Committee today was considering a proposal by the Secretary-General to postpone returning to Member States some $84.4 million, representing 50 per cent of the net cash available for credit to Member States as of June 2002.  The proposal follows an extraordinary acceleration in United Nations peacekeeping, including new and possible missions in Liberia, Côte d’Ivoire, the Sudan, Haiti and Burundi, as well as the expansion of the operation in the Democratic Republic of the Congo and the possible extension of the East Timor mission.  Other factors that had led to a cash shortage included cross-borrowing to sustain operations of several open missions and the International Tribunals and the time lag between the approval of assessments and the collection of contributions.

Vladimir Kuznetzov, Chairman of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introducing that body’s report, said that, facing an unusual, if not unique, situation, where potentially large and expensive peacekeeping missions might be coming one after another, cash available in closed missions would be required to supplement the Peacekeeping Reserve Fund.  While the postponement of the return of “available cash” to Member States was a policy decision to be made by the Assembly, cash from closed missions was the only source for temporary cross-borrowing when Tribunals, or active missions, ran out of cash.  Other funding options, such as the Peacekeeping Reserve Fund, were restricted in use.

Several speakers noted that the reason for the difficulties experienced by the Organization was a result of the failure of some Member States to pay their assessments on time and in full.  In that respect, the representative of Ireland, speaking on behalf of the European Union, said that a decision to retain funds from closed mission would not be a solution to the United Nations’ ongoing dire financial situation, but merely a temporary band-aid for a much wider problem.  Allowing the Secretariat to retain Member States’ money from closed missions was simply another form of subsidy, which was unacceptable.  She requested the United States to review and adjust its payments schedule to ensure the financial viability of the Organization throughout the year.

Australia’s representative, also speaking on behalf of Canada and New Zealand (CANZ), said Member States were being asked to forego the repayment of money owed to them in order to ameliorate a situation caused in part by other Member States not paying their assessments.  He asked for a full summary of the current cash situation, as well as a current list of outstanding contributions, broken down by account and MemberState.  He also asked for a paper detailing which States were owed money, identifying which of them had arrears in other accounts.

South Africa’s representative, speaking on behalf of the African Group, expressed concern about possible delays in the reimbursements to Member States that contributed troops and equipment to peacekeeping.  Many of those countries were from Africa and many were developing States.  Their continued efforts to support peacekeeping operations would be greatly enhanced if the United Nations met its obligation to reimburse them in a timely manner.  It was not fair to expect those countries to shoulder that additional burden.

Also speaking this morning were the representatives of Uruguay, United States, Argentina, Egypt, Nigeria, India, Algeria, Bangladesh, Thailand, Pakistan, Japan and Morocco.

Catherine Pollard, Director of the Peacekeeping Financing Division, introduced the Secretary-General’s report and responded to delegates’ questions.

The Committee will meet again at a time and date to be announced.

Background

As the Fifth Committee (Administrative and Budgetary) met this morning, it was expected to consider administrative and budgetary aspects of the financing of peacekeeping operations, notably the implementation of paragraph 3 of General Assembly resolution 57/323.

The Committee had before it a note by the Secretary-General (document A/58/723) on the issue, which recalls that in its resolution 57/323 of June 2003, the Assembly requested the Secretary-General to return 50 per cent of the net cash available for credit to Member States as of 30 June 2002, in the amount of some $84.4 million, by 30 June 2003.  It also decided to postpone the return of the remaining 50 per cent until 31 March 2004 in respect of the fund balances of 13 closed peacekeeping missions.  The net cash available for credit to Member States as of 29 February 2004 amounted to some $57.4 million.

The Secretary-General notes that loans totalling some $152 million were made between 30 June 2003 and 29 February 2004 to sustain the operations of the United Nations Interim Administration Mission in Kosovo (UNMIK); the United Nations Mission for the Referendum in Western Sahara (MINURSO); the International Criminal Tribunal for the Former Yugoslavia and the International Criminal Tribunal for Rwanda.  Those loans resulted from significant cash shortages in UNMIK, MINURSO, and the two Tribunals owing to non-payment of assessments.  The cash available in the Peacekeeping Reserve Fund as of 29 February 2004 amounted to about $74 million.  That, together with the $57.4 million currently available in the special accounts of closed missions, totals some $131.4 million.

In February 2004, the Security Council established the United Nations Operation in Côte d’Ivoire (UNOCI) and declared its readiness to establish a follow-up stabilization force in Haiti, the note states.  The United Nations Mission of Support in East Timor may be extended for a further 12-month period beyond May 2004 and discussions are ongoing regarding potential United Nations operations in Burundi and the Sudan.  All those would give rise to immediate cash requirements before the General Assembly was in a position to review and approve the related budgets and the amounts to be assessed.

The cash related to closed missions -- $57.4 million –- and the amount available to the Peacekeeping Reserve Fund -- $74 million –- would, therefore, be required to meet the immediate cash requirements of UNOCI and the potential missions.  Prudence dictates, therefore, that the return to Member States of some $84.4 million, representing 50 per cent of the net cash available for credit to Member States as of 30 June 2002, be postponed.  The Secretary-General proposes that the Assembly revisit the issue at the main part of its fifty-ninth session in the autumn of 2004.

In the opinion of the Advisory Committee on Administrative and Budgetary Questions (ACABQ) (document A/58/732), the postponement of the return of “available cash” to Member States is a policy decision to be determined by the General Assembly.

According to the report, the Advisory Committee has been provided with information concerning projected cash requirements for peacekeeping missions from March to September 2004.  Three missions were expected to start up by June 2004 -— in Côte d’Ivoire, Haiti and the Sudan —- each of which would require a pre-mandate commitment authority of $50 million, with the result that the Peacekeeping Reserve Fund would reach maximum utilization.

The budget for the United Nations Operation in Côte d’Ivoire (UNOCI) is to be submitted to the General Assembly at its resumed fifty-eighth session, in May 2004, the report further states.  The mission in the Sudan is expected to be large and it is anticipated that there will be a need for additional interim funding above $50 million, which would require the approval of the Assembly.  A budget for the mission will be submitted to the Assembly in September 2004.  For Haiti, a budget will also be submitted in September 2004.  For all of these, the Peacekeeping Reserve Fund and/or borrowing from closed missions will be necessary for financing until assessments begin to be paid.

The Advisory Committee was further informed that, in addition, extension of the United Nations Mission of Support in East Timor (UNMISET) may be authorized by the end of April 2004. In that case, interim funding would be required for the period from July to December 2004 until a revised budget for the period 2004/05 is submitted in September.  The balance in the special account for UNMISET would be used for that purpose; however, June and September payments to troop-contributing countries for troop costs and contingent-owned equipment might have to be postponed in order to conserve cash until assessed contributions come in.

The above scenarios do not include potential developments in respect of Cyprus and Burundi.  Because of the fragile financial situation outlined above and the fact that assessed contributions normally take from 45 to 60 days to start to come in, the cash available in closed missions would be required as a buffer to supplement the Peacekeeping Reserve Fund.

Introduction of Reports

Director of the Peacekeeping Financing Division, CATHERINE POLLARD, introduced the Secretary-General’s note contained in document A/58/723.

A related report of the ACABQ was introduced by that body’s Chairman, VLADIMIR KUZNETSOV, who said that the Organization faced an unusual, if not unique, situation, where potentially large and expensive peacekeeping missions might be coming one after another.  Thus, cash available in closed missions would be required to supplement the Peacekeeping Reserve Fund.  The postponement of the return of “available cash” to Member states was a policy decision to be made by the Assembly.  However, it should be noted that cash from closed missions was the only source for temporary cross-borrowing when Tribunals, or active missions, ran out of cash.  Other funding options, such as the Peacekeeping Reserve Fund, were restricted in use.

Speaking of the Peacekeeping Reserve Fund, it would be required to meet the immediate cash needs of UNOCI and UNMISET, as well as other potential missions.  Moreover, the Strategic Deployment Stocks did not have the capacity to meet all those eventualities.  An increase in the level of the Reserve Fund would not address the short-term liquidity problem; it could only be solved by an improved pattern of payment of assessed contributions.  The Advisory Committee recommended acceptance of the Secretary-General’s recommendation to maintain the authorized level of the Fund at $150 million and to apply the balance in excess of the authorized level to meet the financing of the support account for peacekeeping operations for the period from 1 July 2004 to 30 June 2005.

Statements

MARGARET STANLEY (Ireland), speaking on behalf of the European Union, noted that the Secretary-General proposed the retention of the funds from closed mission accounts because of the immediate cash needs of new and expected peacekeeping missions and that there was a significant time lag between the approval of assessments and the collection of contributions.  The Union strongly believed that any decision in favour of retaining those funds would not be a solution to the United Nations’ ongoing dire financial situation and would merely be a temporary band-aid for a much wider problem.  It was important to consider in detail not only the effects, but also the causes of the problem.

“Let us be frank, those Member States that pay on time and in full are effectively subsidizing those that do not”, she said.  Allowing the Secretariat to retain Member States’ money from closed missions was simply another form of subsidy.  That was an unacceptable state of affairs.  The reason the United Nations was facing a shortfall was the late or non-payment of assessments by many Member States.  That would be compounded this year by increasing budgets for peacekeeping operations and Tribunals.  In that respect, the Union would urge the United States to actively review and adjust its payments schedule to ensure the financial viability of the Organization throughout the year.  The Union reiterated the position it had consistently taken, in line with the Charter, of full, timely and unconditional payments by all Member States.  Therefore, she requested a clear statement from the Secretary-General on the causes of the cash-flow problems, especially in peacekeeping, as well as inventive ideas on ways of rectifying them.

DAVID DUTTON (Australia), speaking also on behalf of Canada and New Zealand (CANZ), said the United Nations was presently experiencing an extraordinary acceleration in peacekeeping activity.  In addition to the creation of UNMIL and the expansion of MONUC last year, the Security Council had mandated a peacekeeping mission in Côte d’Ivoire and might soon establish missions in Sudan, Haiti and Burundi, creating significant cash requirements which might exceed the level of the Peacekeeping Reserve Fund.  It was imperative that the United Nations had the necessary cash at its disposal to launch the missions quickly and effectively.  The cash situation was much worse than it should be, due to the failure of many Member States to pay their assessments despite their legal obligations to do so, requiring significant cross-borrowing to sustain peacekeeping missions and the tribunals.  The extent of arrears and the payment record of too many Member States were deplorable.

The Secretary-General had presented a possible solution to the cash shortage, he continued, proposing that the Organization retain some $84 million in closed mission accounts that would otherwise be returned to Member States.  Member States were being asked to forego the repayment of money owed to them in order to ameliorate a situation caused in part by other Member States not paying their assessments.  That situation was inequitable.  He asked for a full summary of the current cash situation, as well as a current list of outstanding contributions, broken down by account and MemberState.  He also asked for a paper showing which States were owed money, identifying which of them had arrears in other accounts.  During informal consultation, he wished to explore more equitable solutions, including whether it might be possible to retain the money only of those States that had arrears in other accounts.  He also wished to discuss the possibility of allowing the Secretariat to cross-borrow from active peacekeeping accounts in order to start new missions.  Member States needed to make immediate efforts to clear all their arrears.

SANTIAGO WINS (Uruguay) said his country attached the highest priority to the issue of peacekeeping operations.  Despite its difficult financial situation, it made every effort to honour contributions.  Uruguay’s main contribution was at the human-resource level, with more than 1,800 people deployed on different missions, especially in Africa.  It was clear that the current funds of $74 million in the reserve fund and the $57.4 million currently available in the special accounts of closed missions did not seem sufficient.  He did not support the practice of cross-borrowing, which had been strongly criticized in the Committee in the past.  The Secretary-General had presented an alternative proposal, which had the favourable opinion of the ACABQ, that the issue be revisited during the main part of the fifty-ninth session.  He welcomed that proposal and supported it as a provisional and pragmatic solution.

Continuing, he said he recognized that the proposal might place a burden on countries that paid their contributions on time.  It was also true that the main troop-contributing countries, namely developing countries with limited financial capacity, might experience sacrifice as a result of the delay in receiving reimbursements.  While the situation was complex, he supported the Secretary-General’s recommendation as the best solution to the specific situation facing the Organization.

KAREN LOCK (South Africa), speaking on behalf of the African Group, said that, given the content of the reports before the Committee, it was appropriate to emphasize the legal obligation of all Member States to bear the financial expenses of the United Nations, in accordance with its Charter.  It was also fitting to stress the common responsibility of Member States to ensure that assessed contributions were paid in full, on time and without conditions.  At the same time, however, there was a need to extend sympathetic understanding to those Member States that were unable to meet their obligations due to genuine economic difficulties.

Last May, her delegation had supported a more cautious approach to returning the credits, although it was only fair to reimburse those States that had faithfully met their commitments to the closed missions.  She also recalled that less than six months ago the Under-Secretary-General for Management had informed Member States that the Organization could “ill-afford” to return the amount of $84 million to Member States by the end of March and that the regular budget and tribunal budgets might end 2003 in deficit due to the late or non-payments of assessed contributions.  There had been no marked improvement in the financial health of the United Nations and the Organization was once again faced with a difficult choice.

Noting loans of $152 million that had been made from special accounts of closed missions, she said that her delegation remained concerned with the practice of cross-borrowing.  However, it was only fair to acknowledge that the Secretary-General had been left with little alternative.  Cash shortages in two active peacekeeping operations and the Tribunals due to non-payment of dues were threatening the viability of those missions.  That dire situation had regrettably also made it unfeasible for the United Nations to return the remaining credits to Member States by the end of March 2004.  The course of action proposed by the Secretary-General was sensible and she supported a decision that would not only ensure financial stability of the Organization, but also support its peacekeeping efforts.

In addition, the cash available in the Peacekeeping Reserve Fund may not be sufficient to meet the immediate requirement of the United Nations Operation in Côte d’Ivoire and potential missions in Haiti, Sudan, Burundi and Cyprus, she continued.  In that regard, she noted the observation of the ACABQ that the cash available in closed missions would be required as a buffer to supplement the Peacekeeping Reserve Fund, bearing in mind the fragile financial situation of the Organization and coupled with the fact that there was a significant time lag between the approval of assessments and the collection of contributions.

She trusted that the Secretariat would make every effort to avoid any delays in the reimbursements to Member States that contributed troops and equipment to peacekeeping, she said.  Many of those countries were from Africa and many were developing States.  Their continued efforts to support peacekeeping operations would be greatly enhanced if the United Nations met its obligation to reimburse them in a timely manner.  She was thus concerned that payments to troop-contributing countries would have to be postponed in order to conserve cash until assessed contributions came in.  It was not fair to expect those countries to shoulder that additional burden.

CHRISTOPHER WITTMANN (United States) said his delegation had also expressed unease when the Committee had considered the issue last year on the distribution of closed peacekeeping funds for many of the same reasons cited today.  While the United States was concerned about the Organization’s financial health, until the situation was resolved, it was reluctant to make the Secretariat go cold turkey.  The United States did not favour the practice of cross-borrowing, as it provided an artificial cushion.  However, the Secretariat had made a case for retention of funds, given the unexpected and extraordinary expenses facing the Organization in considering three new peacekeeping operations.

He said his delegation supported the Secretary-General’s request that the distribution not be preformed during the current session.  Although the United States had received 10 per cent of the last distribution, it was willing to keep funds in the Organization for the purpose of allowing it to effectively carry out its activities.  He supported the Secretary-General’s proposal that the issue be revisited during the main part of the Assembly’s fifty-ninth session.  The Committee should be focusing on immediate needs to support the peacekeeping operations approved by the Security Council, he added.

GUILLERMO KENDALL (Argentina) said his delegation supported the statements made by the representatives of Uruguay, South Africa and the United States.

YASSER ELNAGGAR (Egypt) expressed agreement with elements presented by Uruguay, South Africa, the United States and Argentina.  He stressed the importance of Member States’ commitment to making their assessments on time and in full.  He also expressed deep concern regarding the Organization’s precarious financial situation.  While the Secretariat must take all measures in face of that situation, those measures could not be a replacement for Member States’ commitment and obligations.  Although he supported cross-borrowing between peacekeeping operations, in view of Member States responsibility to maintain international peace and security and the current trend to establish new peacekeeping operations, he understood the Secretary-General’s proposal.

NONYE UDO (Nigeria) said that due consideration had been given to the precarious situation of the United Nations at the time resolution 57/323 was adopted.  Postponing the return of 50 per cent of the cash available for credit to Member States until 31 March, the decision demonstrated Member States’ commitment to peacekeeping.  It was made to ensure that the Organization remained buoyant and to allow time for the receipt of payments.

Recently, the Security Council had approved new mandates, which required immediate cash, she continued.  The only additional source of funding to implement those mandates appeared to be the amount in closed missions’ accounts.  Nigeria realized that the decision to further postpone payment would lead to further delays in repayment to troop- and equipment-contributing countries.  As a developing troop-contributing country, Nigeria, to the best of its ability, paid its dues to the Organization and fully subscribed to the conviction that Member States needed to make their payments in full, on time and without conditions.

Immediate challenges were enormous and obligations were high, she said.  Again the Member States were expected to demonstrate their commitment to the work of the United Nations.  Under the current circumstances, she shared the position that the course of action proposed by the Secretary-General was reasonable, as was the opinion of the Advisory Committee.

JAIDEEP MAZUMDAR (India) agreed with Mr. Kuznetsov that the Organization was facing an unusual, if not unique, situation.  He outlined the situation presented in the Secretary-General’s report and added that there were legitimate concerns on behalf of the countries that paid their dues that they should not be penalized for non-payment by others.  He also shared an opinion that the proposed course of action was not a solution, but a band-aid.  However, such a band-aid was needed to prevent haemorrhaging of the Organization’s funds.  In view of the unusual situation, he had no option but to support the Secretary-General’s proposal.

ABDELMALEK BOUHEDDOU (Algeria) supported the delegations that had expressed their desire to see the Secretariat keep the equity with regard to closed missions.  Resorting to the practice of cross-borrowing, while not desirable, was sometimes necessary in exceptional situations, such as the one facing the Organization today.  In that regard, he favoured the ACABQ’s recommendation for postponing a decision on the matter until the Assembly’s fifty-ninth session.

MOHAMMED MUSTAFIZUR RAHMAN (Bangladesh) supported the views expressed by Uruguay, South Africa, Nigeria, Egypt and others.  While he too was concerned with the practice of cross-borrowing, the money must be retained to meet the needs of unexpected peacekeeping operations.  Member States should pay their contributions in full, on time and without conditions.

ATIPAT ROJANAPAIBULYA (Thailand) said he shared the views expressed by other speakers supporting the Secretary-General’s proposal.  He urged all Member States to fulfil their obligations.  Thailand attached great importance to United Nations peacekeeping operations, which was one of the Organization’s most important activities.

SHOZAB ABBAS (Pakistan) urged all Member States to pay their assessed contributions in time and in full to support the United Nations’ activities.  He also supported the Secretary-General’s proposal to postpone payment of funds available from closed missions and revisit the issue during the fifty-ninth session.

HITOSHI KOZAKI (Japan) supported statements in support of the Secretary-General’s proposal and the views expressed in the ACABQ report.

AICHA AFIFI (Morocco) associated herself with previous statements in support of the Secretary-General’s proposal and recommendations of the ACABQ.

Responding to questions and comments from the floor, Ms. POLLARD addressed the causes of the cash-flow problem, saying that the cash requirements for upcoming missions would exceed the level of the Peacekeeping Reserve Fund.  When assessments were issued, it usually took over 60 days for the payments to be received.  While it was expected that assessments for several new missions would be issued in July, she anticipated receipt of funds sometime in September.  Thus, the cash was needed to carry the missions through that period to alleviate potential operational difficulties.

As for ongoing operations, as a result of non-payment of contributions, loans had been made to several missions and the two Tribunals.  An increase in the level of the Reserve Fund would not address the short-term liquidity problem.  The only solution would be an improved pattern of payment of assessed contributions.

Regarding statements on the financial situation of the United Nations, she said that the Under-Secretary-General for Management would make her detailed presentation in May.  On the listing of contributions outstanding, the contributions section had been asked to provide that information.  As for several proposals made today, she said that the Secretariat could not start retaining money only from States that had arrears on its own.  Such a decision required concurrence from Member States.  As for the use of cash in active missions to support new ones, the existing rules prevented the Secretariat from doing that, as well.  Also, drawing funds from active missions would adversely impact their activities.

Turning to payments to troop- and equipment-contributing countries, she said that last year, quarterly targets had been set in that regard.  This year, it was anticipated that the first payment would be made in April.  However, depending on the situation, the frequency and amount of payments might be reduced.

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