Vicious Circle of Liquidity Shortages Disrupting United Nations Mandate Delivery, Management Chief Tells Fifth Committee, Presenting Key 2021 Financial Indicators
The United Nations senior management official told members of the Fifth Committee (Administrative and Budgetary) today that the Organization’s budget process is locked in a vicious circle of annual liquidity shortages that are hampering the delivery of mandates.
As she laid out the Organization’s key financial indicators for 2021, Catherine Pollard, Under-Secretary-General for Management Strategy, Policy and Compliance, said the increasingly stringent cash conservation measures taken in 2020 and early 2021 have reduced the risk of disrupting the Organization’s operations or exhausting all its liquidity reserves. Yet the tight expenditure controls will keep hampering budget implementation and mandate delivery, as activities and outputs are postponed or cancelled.
“Without adequate liquidity, we cannot spend the budget in full; what we do not spend has to be returned to Member States later, and such return of funds creates a liquidity shortage in the year in which they are returned,” Ms. Pollard said. “This vicious circle of a liquidity shortage creating more such shortages, will create systemic underperformance in mandate delivery, unless the underlying issues are addressed.”
The cash deficiency in the regular budget has been occurring later in the year, due to the Secretariat’s stringent cash conservation measures, she said. For example, while the Secretariat had to borrow from the Working Capital Fund in May in 2018, it turned to this fund two months later in July during 2019 and in September in 2020. The Secretariat has not yet borrowed from the fund this year. The size of the regular budget deficits also has declined since 2019, when it reached $520 million. The deficit totalled $488 million in October 2018 and $334 million in December 2020.
She said Chart 2 of her presentation displays the regular budget cash position and shows the regular budget cash shortfall was reduced to $160 million at the end of 2020. For this year, large cash inflows in April, along with controlled spending until May 2021, worked to create a positive cash position at the end of September. “The fourth quarter collections in 2021 will determine whether the shortfall will be greater or lesser this year,” she said.
Chart 3 summarizes the status of regular budget assessments as of 30 September 2020 and 8 October 2021. In 2021, assessments were issued at a level of $2.96 billion, $88 million more than the 2020 level. Payments received by 8 October 2021 totalled $2.51 billion, $427 million more than around the same time last year. The chart also shows the reduction in unpaid assessments from $1.5 billion as of 30 September 2020 to $1.3 billion as of 8 October 2021. Collections at the end of September were $139 million more than anticipated, due to the large collections received in April. “Collections in the final quarter remain critical for the outcome of 2021 and it is essential that we collect more than 100 per cent this year to reduce record level arrears,” she added.
As seen in Chart 4, 130 Member States had fully paid their regular budget assessments by 8 October 2021, compared to 124 Member States at the end of September 2020. She thanked the 130 Member States listed in Chart 5 for their regular budget contributions, including those whom also paid a partial advance for 2022. Chart 6 shows the 63 Member States who are yet to fully pay their regular budget dues, six less than in September 2020. Since the cut-off date, Belarus has paid in full.
Chart 7 provides a comparative view of the largest outstanding assessments for the regular budget as of 30 September 2020 and 8 October 2021. [According to the chart, the United States was responsible for the largest portion of unpaid regular budget assessments, owing $1.002 billion as of 8 October 2021, compared with $1.09 billion on 30 September 2020. The 8 October 2021 figure does not include a $200 million payment the United States subsequently made. Argentina followed by owing $64 million, compared with $59 million in 2020; and then Brazil, owing $58 million compared with $119 million in 2020.]
Turning to the Organization’s peacekeeping operations, Ms. Pollard noted the different financial period for the missions, which runs from 1 July to 30 June, rather than the calendar year of the regular budget. Chart 8 details the status of peacekeeping assessments and collections during 2021. Assessments during 2021 totalled $3.8 billion, with $2.7 billion being assessed in July for the 2021/22 fiscal year for mandated periods. Since the peacekeeping scales of assessment effective for January 2022 have not yet been approved, assessments for the 2021/22 fiscal year have been issued only for the period until 31 December 2021. The collections as of 8 October 2021 totalled $4.8 billion and the total amount outstanding as of that date tallied $2.2 billion, compared to $2.8 billion at the end of September 2020.
As shown in Chart 9, as of 8 October 2021, 48 Member States had paid all peacekeeping assessments in full. This was 10 more than 30 September 2020. Since the cut-off date, Botswana and Lithuania have also paid their assessment in full.
Chart 10 provides an overview of the outstanding amounts related to specific peacekeeping missions, she said. The $2.2 billion outstanding as of 8 October 2021 comprises nearly $1.8 billion owed for the operations of active missions and nearly $400 million for closed missions. Pertaining to the $1.8 billion owed for active missions, $1.1 billion relates to 2021 assessments and $655 million relates to assessments in 2020 and before.
Chart 11 details the Member States with unpaid peacekeeping assessments as of 8 October 2021. [According to the chart, the United States was responsible for the largest portion of unpaid peacekeeping assessments, owing $1.23 billion as of 8 October 2021, compared with $1.39 billion on 30 September 2018. Brazil followed by owing $266 million as of 8 October 2021, compared with $264 million on 30 September 2020; and Saudi Arabia owed $118 million as of 8 October 2021, compared with $64 million on 30 September 2020.]
With its approval of resolution 73/307, the General Assembly directed the Secretary-General to issue assessments for peacekeeping operations for the full budget period, including the period for which the Security Council has not yet approved a mandate. There would be an understanding that the “advance” assessment is considered due within 30 days of the effective date of the extension of the peacekeeping operation’s mandate.
Chart 12 details the impact of the Assembly’s decision, she said. In July 2021, $381 million was assessed for peacekeeping operations for the “non-mandated” period through the end of this December. Comparatively, such assessments for “non-mandated” periods were $2.37 billion for 2019/20 and $2.47 billion for 2020/21. The lower amount for the 2021/22 period is due to the non-availability of scales for the January-to-June 2022 period. This chart shows the amounts paid voluntarily by Member States against these assessments. Along with the Assembly decision in resolution 73/307 to remove restrictions on cross-borrowing of cash for active missions, the practice of assessment and collection for non-mandated periods keeps improving the overall liquidity of active peacekeeping operations, she said. As of 8 October 2021, pending the Assembly’s approval of the 2022-2024 scale of assessment and based on provisional estimates, Member States have made advance payments of $84 million for the first six months of 2022. She thanked the Member States who have reached out for provisional amounts based on the current scale. This helps improve overall liquidity, which helps settle dues to troop- and police-contributing countries.
Chart 13 lists the 25 Member States that have paid in full for the period until 31 December 2021, including the non-mandated period.
Chart 14 shows the status of peacekeeping cash over the last three years. As of 30 September 2021, the cash balance consisted of about $2.6 billion in the accounts of active and closed missions, and the Peacekeeping Reserve Fund, she said. The use of the Peacekeeping Reserve Fund is restricted to new operations and expansion of existing operations.
Chart 15 shows the total liabilities for payments to Member States as of 30 September 2021. Payments for troops, formed police units and for contingent-owned equipment claims for active missions totalled $88 million, and $86 million for closed missions. Payments for contingent-owned equipment and troop and formed police unit costs are settled for all missions up to 30 June 2021, except for the African Union-United Nations Hybrid Operation in Darfur (UNAMID). That was paid up to 30 September 2020.
Chart 16 shows the breakdown of the overall amount owed for troop and formed police units, and for contingent-owned equipment to Member States as of 30 September 2021.
Turning to the international tribunals, Ms. Pollard said Chart 17 lays out their financial situation. As of 8 October 2021, total contributions outstanding for the tribunals tallied $59 million. This includes amounts outstanding for the International Criminal Tribunal for Rwanda, which was last assessed in 2016; the International Criminal Tribunal for the Former Yugoslavia, which was last assessed in 2018; and the Mechanism for International Criminal Tribunals, assessed in 2021. Chart 18 shows that 11 Member States had paid their assessed contributions in full for all the tribunals, five more than of 30 September 2020. Since the cut-off date, Belarus has also paid its tribunal assessment in full.
Chart 21 summarizes the status of assessments and unpaid assessments for each of the three categories of operations at the end of the last two years, as well as around the third quarter, for comparison purposes. Unpaid assessments for the regular budget and peacekeeping operations are lower this year, but higher for tribunals, compared to a similar period last year.
Ms. Pollard said the Organization’s financial health depends on Member States meeting their financial obligations in full and on time. The Secretariat intends to use the resources it is given in a cost-effective and efficient manner, and transparently provide Member States with information. She expressed hope that Member States would consider the Secretary-General’s proposals, part of an upcoming report on the Organization’s financial situation. This would arrest the trend of systemic under-performance on mandate delivery, under regular budget operations, due to the lack of adequate liquidity reserves, compounded by structural weaknesses in budget management capabilities, she explained.
The Fifth Committee will reconvene at 3 p.m. Friday, 22 October, to hear an address by the President of the Assembly’s seventy-sixth session and to discuss the proposed 2022 programme budget for special political missions.