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Statement to the Fifth Committee - UN Finance - Global Policy Forum Statement to the Fifth Committee
on the UN Financial SituationBy Joseph Connor
Under Secretary General for ManagementExtract from UN Press Release:GA/AB/3395
October 17, 2000This morning, the Fifth Committee (Administrative and Budgetary) met to hear a statement by the Under-Secretary-General for Management, Joseph E. Connor, on improving the financial situation of the United Nations.
Statement by Under-Secretary-General for Management
Reading the statement by the Under-Secretary-General for Management, JOSEPH E. CONNOR, Assistant Secretary-General for Central Support Services TOSHIYUKI NIWA said that often history repeated itself, but not as far as the United Nations finances were concerned. Last year was a good year, but he could not say the same for 2000.
The question was whether the Organization had the financial foundation to take on the cycle of initiatives to be considered at the current Assembly session -- the expansion of peacekeeping field operations, and Headquarters backstopping support; better security protection for United Nations staff; additional resource commitments to the Tribunals; and a capital master plan completely refurbishing United Nations Headquarters. The United Nations financial affairs demanded a healthy balance between how much had been assessed and how much had been paid.
He went on to say that the overall level of assessment for 2000 would be the highest in five years -- $3.3 billion. According to estimates, assessment levels could reach $3.5 billion in 2001. Year 2001 requirements could begin to rival the resource requirements of 1994 and 1995. Only the regular budget assessment had remained constant, without any growth over the entire 1994 to 2000 period. Tribunal assessments showed a different picture: negligible amounts a few years ago; up each year since; and more projected -- at a level close to $200 million -- for 2001.
Peacekeeping had the largest, and most erratic, resource requirements, he continued. The bulk of peacekeeping assessments were rendered twice a year, usually in January and July, with sporadic amounts assessed throughout the year to deal with new and extended or expanded missions. There had been a constant flow of assessment notifications throughout the year, but it had not been followed by the same number of payments. As a result, at 30 September 2000, unpaid assessments -- regular budget, peacekeeping and Tribunals together -- totalled $3.094 billion.
Unpaid peacekeeping assessments alone had reached a staggeringly high level of $2.5 billion, he said. Unpaid Tribunal assessments were also continuing to rise. Only regular budget payments would show a positive pattern at year-end. The picture was even more stark if one looked at actual amounts of unpaid assessments -- peacekeeping at $2.507 billion, approximately $675 million more than a year earlier. In total, unpaid assessments were up 23 per cent from a year before. Another bad sign was that the amount of unpaid assessments on 30 September -- $3.094 billion -- almost equalled anticipated total assessments for the year -- $3.376 billion. In effect, it meant the Organization was almost a year behind in collecting assessments, which was a dangerous situation. Of the total amount due to September, the major contributor owed 61 per cent of the amount outstanding, he continued. Fourteen other major contributors accounted for 25 per cent. All other Member States owed 14 per cent. Unpaid regular budget assessments at 30 September were some $533 million, an amount higher than what had been anticipated would be owed at 31 December.
Payment of current assessments by the United States would only begin when that Member State started its new budget year on 1 October, he continued. The United States, owed at 30 September 2000, 81 per cent of aggregate regular budget amounts. Two other Member States among the next 14 principal contributors, Brazil and Argentina, had outstanding regular budget contributions amounting to 12 per cent. Those two Member States were expected to make additional regular budget payments by 31 December 2000. In fact, Argentina had done so last week – $1.5 million paid. Of the remaining 173 Member States that had been assessed, 53 owed 7 per cent of the uncollected regular budget total.
Those percentages were not significantly different from a year before, he said. The United States portion was the same, and two other principal contributors' percentage had increased from 9 to 12 per cent. Most significantly, among other Member States, the number with outstanding contributions had reduced from 78 to 53, and their percentage owed had fallen from 10 to 7. There was a substantial change in the number of Member States that paid their assessments in full by the end of the year. That was real progress. At the end of September 2000, that number stood at 131. As of today, that number had increased to 136. Only 52 Member States had not so far paid in full.
On peacekeeping assessments, he noted that all but two of 14 ongoing missions were funded through peacekeeping assessments. The other two, the United Nations Military Observer Group in India and Pakistan (UNMOGIP) and the United Nations Truce Supervision Organization (UNTSO), were funded through the regular budget. Peacekeeping assessments for 2000 were estimated to reach $2.1 billion. Peacekeeping assessment levels had fluctuated irregularly over the last nine years, with highs of over $3 billion in 1994 and 1995 and lows of $900 million in 1998 and 1999. Currently, they were on the upswing. However, peacekeeping levels of assessments were inherently hard to forecast and, even at this point in the year, assessment levels could go higher.
He said that the year 2000 was adding to the upswing pattern as a result of four of the most recently established missions -– United Nations Mission in Sierra Leone (UNAMSIL), United Nations Transitional Administration in East Timor (UNTAET), United Nations Interim Administration in Kosovo (UNMIK), United Nations Organization Mission in the Democratic Republic of the Congo (MONUC). Those four missions apart, assessment levels for this year were considerably smaller, barely reaching $0.4 billion. With the four missions, the aggregate level totalled over $2 billion. Unpaid peacekeeping assessments at the end of September reached a high of $2.5 billion. There was real concern over the imbalance in the amount of assessments unpaid compared to the current levels of assessment. Another concern was that the amount of assessments was highly concentrated. The United States alone accounted for 58 per cent of the aggregate.
In October a number of significant contributions had been received, he continued, including $200 million from the United States, $61 million from Italy and $17 million from France. The United States had also informed the Organization that an additional $100 million should be expected shortly. These two payments from the United States would bring down that Member State's share and percentage of the total owed.
Regarding the two International Criminal Tribunals, he said that since their creation in 1994 and 1995 assessments had increased fourfold. They now stood at $166 million. New proposals from the International Criminal Tribunal for the Former Yugoslavia and the International Criminal Tribunal for Rwanda for the year 2001 showed continued rapid growth. Also growing were the numbers of staff involved -- over 1,600 in 2000, heading up higher in 2001.
Assessment payments had not kept pace, and unpaid assessments were now at $54 million, up from $20 million in 1997, he continued. One hundred twenty-two Member States had unpaid assessments at 30 September 2000. Three Member States -- United States, Russian Federation, France -- accounted for the largest component. Each of the three owed $12 million. France had informed the Secretariat that its Tribunal payments would be made by year-end. The Russian Federation had made no payment for the current year or, in fact, for prior years. The United States arrears continued to grow as that Member State did not pay the full assessed amount.
In a word, he said, deterioration abounded. Assessment levels were increasing markedly, and unpaid assessments were growing at an alarming pace. Non-payments and withholdings were undermining the financial stability of the Organization.
Turning to the cash situation of the United Nations, he said that for the regular budget the cash position during the first nine months of year 2000 showed an all too familiar pattern. The Organization had started the year with a positive balance of $111 million, followed in January through June by an intake of cash following payment of regular budget assessments. It went into a negative position in July and continued to be negative until September, when major payments were received from Japan and the United States. At 30 September, the United Nations was just above the zero line.
To project the year-end cash position, it was necessary to focus on what payments could be made by the major contributor, he said. With action not yet taken by the United States Congress, any forecast would be uncertain. Three possible scenarios, however, seemed possible.
Scenario 1 assumed an end-of-year payment by the United States equivalent to the remaining balance of its current year's assessment, or $267 million. That payment approach was what had occurred in 1999. Scenario 2 assumed that the United States would withhold up to $100 million pending a review. In that case, payment of only $167 million would be made by 31 December 2000. Scenario 3 assumed that no year-end payment would be made, which was unlikely.
Under the first scenario, the regular budget cash balance would be positive by some $48 million, he said -- not as much as 31 December 1999, but still on the plus side. Under the second scenario, the regular budget cash balance would be negative by some $52 million, forcing a return to cross-borrowing from peacekeeping cash at year-end to compensate for the regular budget cash deficit. The third scenario meant a step backward to a very large negative balance. The situation was uncertain. Member States efforts to pay dues currently had ameliorated the cash situation, but the amount of year-end cash depended on one Member State. A return to cross-borrowing remained a very real threat.
Regarding peacekeeping cash, he said that the picture was far different from regular budget cash, but very much in line with the timing and extent of peacekeeping assessments. Peaks in the level of peacekeeping cash occurred in the spring and autumn of the year, lagging several months or so behind the issuance of major peacekeeping assessments. On average, the Organization had $900 million to $1 billion in peacekeeping cash through the year, but that amount was deceptively large.
There was cash currently available for active missions -– about $419 million, he said. With 12 missions to administer, that amount was very low, even marginal. Cash requirements were currently in the order of about $120 million a month, and rising. The present cash balance represented only about three months cash on hand. That was a precarious, if not potentially destabilizing, position. Another complicating factor was the fact that some active missions had better cash positions than others. No cross-borrowing was permitted between active peacekeeping missions. That meant that for certain missions it was necessary to delay planned troop and contingent-owned equipment payments.
There was also cash available for inactive missions of some $374 million, he said. That cash was frozen. Most of it was earmarked for settlement of contingent-owned equipment claims from troop-contributing countries which must be negotiated, finalized and certified before payment. Finally, there was about $180 million in the Peacekeeping Reserve Fund. The Peacekeeping Reserve Fund was a cash flow mechanism to permit rapid response by the United Nations to the needs of new or expanded peacekeeping operations. That amount was derived from individual commitment authority levels granted by the Advisory Committee on Administrative and Budgetary Questions (ACABQ) or by the General Assembly. Once initial assessments were voted, the Reserve Fund was replenished from active mission cash. Follow-on financing was provided through assessed contributions and voluntary contributions.
Turning to the subject of debt to Member States, he reiterated that it remained the Secretary-General's intention to pay Member States for obligations incurred currently for troops and equipment. Arrears would be paid when assessments were collected. That policy had been followed over the last few years. However, this year there was more uncertainty than usual regarding the Organization’s ability to continue that policy.
Clearly, holding back payments had been a source of precautionary financing for peacekeeping as a whole, he said. Now, with the level of resources required to carry out missions increasing, the consequent level of payments due for civilian support and for use of troops and contingent-owned equipment also increased. In effect, the Organization was adding to its debt levels as the year went on. With large and increasing amounts of unpaid assessments, the conviction that the United Nations could remain current on troop and contingent-owned equipment obligations was fading.
At the beginning of the year, debt to Member States for troops and equipment totalled $800 million, he continued. This year, the Organization had completed payment of its final 1999 obligations of $91 million. It was also able to make further payments from arrears collected in 1999 by the United States and the Russian Federation, which together totalled $71 million. However, for the year 2000, obligations incurred in 2000 were running higher than in the past, and were now expected to be of the order of $365 million.
Partial troop and equipment payments had been made during the course of the year, he said. To date, a total of $84 million had been paid to Member States. An end-October progress payment would also be made for active missions of $86 million. More payments were planned by the end of the year to meet the current year's obligations. However, the remaining anticipated payments were almost entirely dependent on the prompt collection of the current year's peacekeeping assessments. In fact, the Organization may have to divert payment of some arrears collected for that purpose, if it received any. To completely pay out the current year's obligations, another $97 million in arrears would need to be paid. If that could be accomplished, year-end debt would total $736 million.
The Secretary-General would make every effort to pay out sufficient funds to prevent an increase in the Organization's debt to Member States for troops and equipment, but he could not, at this time, give any unequivocal assurance on this matter. If the Secretary-General's efforts were successful, debt could drop to its lowest level in six years. That was a pleasant prospect.
Reimbursements were owed to many States, he continued. India led the list with $80 million owed to it, followed by the United States, United Kingdom, Netherlands and Jordan. In general, debt owed for troops and equipment remained high and fiercely resistant to reduction. First priority here was to contain the present debt level by paying out fully this year's obligations. Second priority was to reduce the current debt level using payments for assessments long in arrears. Both priorities gave way to the need to retain enough cash overall to maintain the Organization's cash liquidity.
He said that overall cash liquidity was affected by assessments, cash availability and debt to Member States. The Organization’s combined cash picture at this point in the year was dependent on when and how much the United States would remit to the United Nations by the end of 2000 for the regular budget. Under those circumstances, it was necessary to continue to develop a combined cash forecast based on the three scenarios of possible United States payment outlined previously.
Scenario 1, which assumed full payment by the United States of its regular budget contribution, showed total cash at $1.034 billion, of which $986 million was for peacekeeping and the Tribunals, and $48 million was for the regular budget. The aggregate was below last year's level, and for two years in succession the United Nations had successfully avoided cross-borrowing at year-end to support the regular budget.
Scenario 2 projections would mean combined cash of $934 million, of which $986 million was for peacekeeping and the Tribunals, with a regular budget deficit of $52 million. That scenario meant a return to a deficient regular budget cash position and, of course, cross-borrowing from peacekeeping accounts. Scenario 3 would mean combined cash of $766 million, of which $986 million was for peacekeeping and Tribunals, with the regular budget in deficit of $220 million. That scenario was considered highly unlikely, since it assumed no payment would be made by the United States for its current year's assessment. However, if it occurred, it would mean a substantial deficit in the regular budget and, therefore, a resultant drop in combined cash, to the level of 1998.
In conclusion, he said that, for the regular budget, even with an increasing number of Member States paying in full, the year-end cash position still depended on one Member State. For the Tribunals, there were increasing annual budgets, accompanied by larger unpaid assessments. For peacekeeping, there were increasing assessments, larger unpaid assessments, and available cash was limited. On debt to Member States, the situation remained intractable.
The presentation had been all about money -- where it would come from, how it would be used, where the balances now stood, where they were headed and how much was needed. From a management perspective, the aim was to manage money wisely. The Organization had value to repay to Member States for the money entrusted to it. Paraphrasing Derek Bok -- the past President of Harvard University -- if you think peace and development are expensive, try war and poverty, he said.
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