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Low-income Countries Ensuring Liquidity as the UN Faces Financial Crisis

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By J Nastranis

NEW YORK (IDN) – The United Nations is at risk of running out of cash, Secretary-General António Guterres warned in a letter to UN staff in July 2018 and stated that he had “written to Member States regarding the troubling financial situation facing the United Nations”. The situation has not changed for the better since.

In fact, nearly one year later, the situation is preventing the Organization from reimbursing troop- and police-contributing countries in a predictable and timely manner, hindering their ability to provide lifesaving support to peacekeeping operations, Guterres cautioned on June 4, 2019.

Turning to the peacekeeping budget, he warned that cumulative cash balances are decreasing due to growing arrears and late payments. Outstanding contributions to active peacekeeping operations now stand at $1.5 billion, he said, adding that at the end of May 2019, despite a cash balance of $1.3 billion, two large missions only had enough cash to cover two weeks of operations. Three other missions were in deficit.

While the Organization should have cash for at least three months, such a situation puts at risk not only peacekeeping operations, but also those who serve in difficult environments, Guterres said. It also means the United Nations cannot reimburse troop- and police-contributing countries.

While the Peacekeeping Reserve Fund, with $150 million, is available to support new missions, cash from one mission cannot be used by another mission even on a temporary basis.  Moreover, while the aggregate cash balance for active missions is more than $1 billion at any given time, many missions, for short periods, lack the cash required to cover their costs.

The result is a delay in payments to troop- and police-contributing countries – many of them low-income countries – which essentially makes them the financiers of the Organization’s liquidity, he said. Those countries were owed more than $250 million at the end of 2018 and again at the end of the first quarter of 2019. This debt is likely to exceed $400 million at the end of this month.

He proposed that the cash balances of all active peacekeeping operations should be managed from a single pool, thus greatly alleviating the liquidity problems of some operations and improving the timely payments to troop- and police-contributors.  A Peacekeeping Working Capital Fund of $250 million should also be established, he said.  Combined with the pooling of cash balances totalling $1 billion, that would give active operations about two months of operating costs, based on an annual peacekeeping budget of $7 billion.

He went on to propose the issuance of assessment letters for the full budget period, rather than the next mandate renewal, thus ensuring greater predictability in payment patterns, as well as the temporary suspension of the obligation to return unencumbered balances to Member States in order to fund the Peacekeeping Working Capital Fund.

Emphasizing that “we are not trying to single out anyone”, he urged Member States to put aside political differences and long‑standing objections to certain proposals, recommit to paying their financial obligations on time and in full, and help to find a solution to structural problems that are compounding the Organization’s liquidity problems.

“We are at a tipping point and what we do next will matter for years to come,” he said, presenting his report on improving the financial situation of the United Nations.  While the level of arrears at the end of May stood at $492 million, “the solution lies not only in ensuring that all Member States pay in full and on time, but also in putting certain tools in place”.

“I think it is time to face the absurdity of our global budgetary procedure and to look seriously into the kind of changes that need to be made,” he said.

Outlining his proposals for the regular budget, he said he hopes Member States can agree on measures – rejected in the past – to increase the Working Capital Fund to $350 million and to replenish the Special Account. They should also set a single realistic budget level that would permit full implementation of the Organization’s work programme, with the Secretary-General free to manage resources, including staffing, within the budgetary ceiling and with full accountability.

It should also be possible to assess Member States for new mandates at mid‑year, if the cash situation demands it, he said. In addition, Member States should approve a temporary suspension of the return of unencumbered balances until the cash situation normalizes, or at least for the next five years.  Those funds could thus be retained to replenish the Special Account and to fund an increase in the Working Capital Fund.

Cihan Terzi, Chair of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), who introduced its related report, noted the Secretary‑General’s efforts to manage the Organization’s liquidity problems and stressed the need to monitor the situation closely. He underscored ACABQ’s concern regarding reimbursements to troop- and police-contributing countries, as well as the need to do more to ensure that the Organization’s financial obligations to those nations are settled in a timely manner.

In the ensuing debate, the representative of the United States – by far the biggest single contributor, putting $9.5 billion a year into the United Nations system – said the Secretary-General’s recommendations deserve careful consideration. The current situation is an opportunity to institute better fiscal discipline, improve methods for managing and executing approved budgets, and help managers to better administer resources while focusing on results.

The representative of the European Union agreed that the United Nations liquidity situation requires urgent action.  “We are at present on a very strenuous and challenging path towards making a durable and sustainable change in the working of the United Nations,” he said, stressing that the process should be complemented by budget procedures that enable the allocation of funds based on priorities and actual needs on the ground.

The observer for the State of Palestine, speaking on behalf of the “Group of 77” developing countries and China, said any deliberate and unilateral withholding of contributions by Member States with the capacity to pay is unacceptable.  “We now face a paradox in which certain Member States with special privileges are effectively setting the mandates, but not living up to their legal and financial obligations to see those mandates through,” he said.

In that vein, Cuba’s representative said his delegation would not have to reiterate the need to alleviate the United Nations dire financial situation if the United States pays its assessments.  If the largest contributing country fails to fulfil its financial obligation, no successful outcome is possible.

The representative of India, a major troop contributor, said that meeting the cash requirements of active peacekeeping missions by delaying reimbursements to troop-contributing countries and by tapping the cash pool of closed missions has contributed to a false sense of financial soundness.

His counterpart from Pakistan said a pooling mechanism to manage cash balances of all active peacekeeping missions would go a long way towards improving the timely settlement of payments to troop and police contributors.

Disagreeing with the Secretary-General’s assertion that the Organizations budget methodology is outdated, Brazil’s delegate asked why his report did not address the funding and backstopping of special political missions, which in the past 20 years have grown to exceed 20 per cent of total regular budget resources. [IDN-InDepthNews – 11 June 2019]

Photo: Secretariat Building at United Nations Headquarters. Credit: UN Photo/Rick Bajornas

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