Warning that the United Nations is in the midst of a financial crisis that has been years in the making, the Secretary-General presented the Fifth Committee (Administrative and Budgetary) with a set of proposals today designed to put both the regular and peacekeeping budgets of the Organization on more solid ground.
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.
Turning to the peacekeeping budget, which the Committee is currently negotiating for the 2019/20 period, he said outstanding contributions to active peacekeeping operations now stand at $1.5 billion, prompting delayed payment to troop- and police-contributing countries, many of them low-income nations � a debt likely to surpass $400 million by the end of this month.
To correct the situation, the Secretary-General proposed that all peacekeeping operations be managed from a single funding pool, alongside the establishment of a Peacekeeping Working Capital Fund, the issuance of peacekeeping assessment letters for the full budget period and the temporary suspension of the obligation to return unencumbered balances to Member States in order to fund the proposed Peacekeeping 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.
In other business, Chandramouli Ramanathan, Controller and Assistant Secretary-General for Programme Planning, Finance and Budget, introduced the Secretary-General's report on the United Nations Mission to Support the Hodeidah Agreement, established by the Security Council through resolution 2452 (2019) to support a ceasefire between the Government of Yemen and the Houthi militia. Putting estimated total resource requirements for the period from 21 December 2018 to 31 December 2019 at $57.9 million, it provides for the deployment of up to 75 United Nations monitors, 69 international and 69 national staff positions and 5 Government-provided personnel, in addition to two aircraft, armoured vehicles, medical services, communications and information technology, and longer-term facilities for a mission now operating from a rented vessel.
Mr. Terzi presented the Advisory Committee's related report.
Speaking at the close of today's meeting, Gillian Bird (Australia), Committee Chair, said delegations should aim to complete the Committee's resumed seventy-third session by 14 June.
Also speaking today were representatives of Singapore (on behalf of the Association of Southeast Asian Nations and in its national capacity), Canada (also on behalf of Australia and New Zealand), Switzerland (also on behalf of Liechtenstein), Russian Federation, Morocco, Japan and China.
Improving the Financial Situation of the Organization
ANTA�NIO GUTERRES, Secretary-General of the United Nations, introduced his report on improving the Organization's financial situation (document A/73/809), stating that the United Nations is in the midst of a financial crisis that has been years in the making. That crisis is undermining mandate delivery and reform efforts, as well as preventing the timely and predictable reimbursement of troop- and police-contributing countries. 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 liquidity problems. We are at a tipping point, he said, and what we do next will matter for years to come.
Growing arrears from Member States in both the regular and peacekeeping budgets is a major cause of the crisis, but another problem is inherent structural weaknesses and rigidities in budget methodologies, he said. Turning first to the regular budget, he said the situation is much worse than ever and, if left unaddressed, it will directly affect mandate delivery. Cash shortages now occur earlier in the year, with the third quarter being most problematic. Despite efforts to contain expenditures, the United Nations is likely to run out of cash in August and therefore borrow from the Working Capital Fund. At the same time, cash deficits are surpassing cash available from the Working Capital Fund and the Special Account. Reserves are likely to be exhausted in September or October, forcing the Organization to again draw on resources from closed peacekeeping missions. Recalling that the United Nations exhausted all its liquidity reserves in 2018, he said its inability to meet its payroll and pay its supplies would be catastrophic for its reputation and business continuity.
To avert a bigger crisis, he said he instructed managers earlier this year to adjust their hiring and non-post expenditures. But with nearly 70 per cent of the regular budget going towards salaries and staff costs, hiring delays are causing operational problems, he said, adding that delaying other expenditures to paying salaries is also unsustainable. In such a scenario, budget implementation is no longer driven by programme planning, but by the availability of cash at hand � thus going against efforts to focus less on inputs and more on results. While the Organization has more assets than liabilities, it lacks adequate liquid assets, forcing it to operate under liquidity constraints for several months of the year, he explained. 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.
The level of arrears at the end of 2018 was $529 million, representing more than 20 per cent of that year's assessments, and five months into 2019, arrears are still at $492 million, he said. However, non-payment and late payment of contributions is not the only problem. Structural weaknesses in budget methodology create a situation in which expenditures outpace the approved budget level and the collection of contributions, he said, citing the impact of fluctuating exchange rates, inflation, salary cost standards and actual vacancy rates which are approved at the end of one year, but assessed the following year. Meanwhile, new mandates approved by the General Assembly and the Security Council after budgets are approved, but which are assessed only at the start of the following year, create a gap that is almost half the size of the Working Capital Fund. Even if all Member States pay on time and in full, the United Nations will still face cash problems towards the end of the year, he said. Based on cash projections for 2019, the situation is expected to remain critical, restricting the scope for minimizing the impact on programme delivery. If the Organization were to begin spending now to ensure the full implementation of its approved programme plan, the deficit in October will surpass last year's $488 million, creating the real risk that it will be unable to pay staff and suppliers. 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, he said.
Outlining his proposals for the regular budget, he said the Organization must increase liquidity. Although Member States in the past failed to endorse his proposals to increase the Working Capital Fund to $350 million and to replenish the Special Account, he said he hoped they now can agree on such measures, thus avoiding a complete disruption of activities. Structural weaknesses must also be addressed, with Member States adopting a single realistic budget level that would allow full implementation of the Organization's work programme. Once that level is approved, the Secretary-General would 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. He went on to ask Member States to approve the 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.
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, 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. 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.
CIHAN TERZI, Chair of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introduced its related report (document A/73/891), noting the Secretary-General's efforts to manage the United Nations recent liquidity problems and that, as reflected in the reports of the Board of Auditors, the Organization's overall financial situation is sound. Recognizing the existence of liquidity challenges, the Advisory Committee stresses that the situation needs to be closely monitored. It also notes with concern the situation regarding reimbursements to troop- and police-contributing countries in numerous peacekeeping missions and underscores the need for further efforts to ensure that the Organization's financial obligations to those nations are settled in a timely manner. The Advisory Committee's recommendations on the respective proposals of the Secretary-General are set out in section III of its report.
The Advisory Committee suggests that the General Assembly approve the suspension of surrender of the unspent appropriations of the regular budget, with the suspension of the relevant financial regulations, for a trial period of one year in 2020, he said. The Assembly is also asked to request updated information on the impact of implementing this measure during its seventy-fourth session. Regarding the Special Account, the Advisory Committee considers that it should continue to complement the Working Capital Fund in managing regular budget cash flow and that a decision on replenishing the Special Account falls within the Assembly's purview.
Regarding a cash pool mechanism, which would allow cross-borrowing among active peacekeeping missions while maintaining separate fund balances and accounts, the Advisory Committee sees merit in the proposal as a way to address the liquidity challenges experienced by the missions, he said. The Assembly should approve the introduction of this mechanism on a trial basis for the 2019/20 budget period and provide information on the implementation of the mechanism during its seventy-fourth session. Concerning the proposal to approve the issuance of assessment letters for peacekeeping operations for the full budget period, the Advisory Committee sees merit in inviting Member States to pay assessments for a full budget period to address the liquidity challenges, with clear indication on the amounts of the contribution corresponding to the current mandate period and an estimation for the remaining part of the budget period subject to potential mandate extension.
SAED KATKHUDA, observer for the State of Palestine, delivering a statement on behalf of the Group of 77 developing countries and China, reiterated his serious concern about the financial health of the United Nations. While recognizing the need to extend sympathetic understanding to those countries that are temporarily unable to meet their financial obligations due to genuine economic difficulties, he stressed that any deliberate and unilateral withholding of contributions by Member States that do have the capacity to pay is unacceptable and has led the Organization into its current sorry state. Urging all Member States in a position to do so to pay their assessed contributions in full, on time and without conditions, he warned: 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.
Meanwhile, management reform within the United Nations must be grounded in the Organization's intergovernmental, multilateral and international character, he said. Expressing concern about proposals to transfer managerial authority to the Secretariat, he underlined the important oversight roles of the Fifth Committee, the Committee for Programme and Coordination and the Advisory Committee, as well as their critical involvement in planning, programming, budgeting, monitoring and evaluation.
BURHAN GAFOOR (Singapore), speaking on behalf of the Association of Southeast Asian Nations (ASEAN) and associating himself with the Group of 77, echoed expressions of concern about the United Nations deteriorating financial situation. The Organization's regular budget had experienced negative cash balances every year since 2012, and in the area of peacekeeping more than $1 million is owed to 85 States � most of which are developing countries. Meanwhile, at the end of 2018, only two peacekeeping missions had cash reserves of more than three months of operating costs. These trends are not sustainable, he stressed, adding that the main financial challenge facing the Organization is a lack of liquidity. Countries that can do so should pay their assessments in full, on time and without conditions.
Pointing out that the Secretary-General's proposals include measures aimed at encouraging payment as well as adjustments to the budget methodology, he stressed that any measures employed must uphold the principles of accountability, transparency and sustainability while giving due recognition to every Member State's capacity to pay. In particular, he said the proposal for managing the cash balances of peacekeeping operations as a pool has merits and looked forward to learning more about how it could address the issue of delayed payment to troop- and police-contributing countries.
SILVIO GONZATO, European Union, agreed that the United Nations liquidity situation requires urgent action and that the continued accumulation of arrears � as well as the inherent structural weaknesses and rigidities in the budget methodologies � undermine the good functioning of the Organization both at Headquarters and in the field. Ensuring the United Nations financial health is a responsibility shared between Member States and the Organization, he stressed, adding that promoting its sound and stable financial footing and management is a priority for European Union member States � which collectively represent the Organization's largest financial contributor. Encouraging all countries to pay their assessed contributions in full, as soon as possible and without conditions, he added that the United Nations reform progress being led by the Secretary-General is an ambitious one.
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. Emphasizing that rules governing the new annual regular budget and peacekeeping budget should help the United Nations respond to the most urgent needs, he added that budgetary instruments are a means to an end and not an objective in themselves.
RICHARD ARBEITER (Canada), also speaking on behalf of Australia and New Zealand, expressed support for the pooling of peacekeeping cash and annual letters of assessment, subject to the constraints laid out by the Secretary-General. Stressing that the practice of paying credits to Member States that have not earned them offends basic notions of fairness and equity, he described such credits as financial transfers from those States that have fulfilled their obligations to those that have not. Noting that in most of the rest of the United Nations system assessed contribution budget credits are automatically applied against a Member's arrears, he said the General Assembly needs to catch up with that practice. He further expressed hope that the Assembly's approval of the Secretary-General's proposals will suffice to put all peacekeeping missions on sounder footing and improve the Organization's respect for the obligations outlined in Memoranda of Understanding it signs with troop-, police- and equipment contributors. In addition, questions relating to a Peacekeeping Working Capital Fund should be considered only as a last resort, as there is a significant risk that a deeper buffer in that area will inadvertently lead to debtors falling further into debt with the Organization.
Meanwhile, the Special Account � filled by several well-meaning donors to supplement the Working Capital Fund � should at minimum be restored by the General Assembly using regular budget unencumbered balances and the cancellation of prior-period obligations in the amount taken out, namely $63.2 million, he said. In that regard, he called on all contributors to the Special Account to stand firm in demanding that the funds they contributed be restored and used exclusively for their intended purpose.
DOMINIQUE MICHEL FAVRE (Switzerland), speaking also for Liechtenstein, said that action is needed in two key areas. First, the budget methodology and regulatory framework are outdated. Structural weaknesses must be addressed. His delegation supports many of the proposals by the Secretary-General. The Secretary-General, as the Chief Administrative Officer, should have more leeway in managing the budget. He should be authorized to reallocate resources within budget sections, as the need arises, while ensuring full accountability and transparency to Member States. Second, payment patterns must have tangible consequences for Member States. There should be strong incentives for early payment of contributions and clear disincentives for late or non-payment.
CHERITH NORMAN-CHALET (United States) said the United Nations requires enhanced budgetary approaches that will make it more effective, nimble, accountable, transparent and efficient. As the biggest single donor to the United Nations system by far, contributing $9.5 billion in assessed and voluntary funding, the United States remains seized of the Organization's financial situation and notes the inherent structural weaknesses in the current budget methodologies. On the Secretary-General's report, she said it contains concrete recommendations that require careful consideration. The current situation is also 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 United States looks forward to engaging with all delegations with a view to reaching consensus this session, she added.
NAGARAJ NAIDU KAKANUR (India) 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. Countries in arrears are saved from facing the effects of their actions. This practice negatively impacts the United Nations ability to maintain honest agreements with troop-contributing countries on other aspects of the peacekeeping. India expects that the problem will be comprehensively discussed.
HUMBERTO RIVERO ROSARIO (Cuba), associating himself with the Group of 77 and China, said that 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. Any proposal to modify the current arrangements should be carefully analysed in line with the Financial Regulations and Rules. It is imperative to ensure that this process increases transparency and accountability.
BURHAN GAFOOR (Singapore), speaking in his national capacity, said his delegation is open to the idea of suspending the surrender of unspent appropriations for the regular budget for a limited duration to address pressing liquidity issues. However, there must be clarity concerning the duration. Singapore is also open to the idea of replenishing the regular budget's Special Account as it must maintain a sufficient buffer after significant drawdowns. The cash pooling mechanism has merit but offers only a partial solution to the selective and deliberate withholding of contributions to specific missions. It is unfair to expect troop- and police-contributing countries to continue offering their contingents when reimbursements are constantly delayed.
DMITRY S. CHUMAKOV (Russian Federation) stressed the need to avoid a de facto situation in which countries in good standing are forced to subsidize those in arrears. According to the International Public Sector Accounting Standards (IPSAS), the United Nations financial situation is positive. Yet the Organization is increasingly witnessing liquidity challenges. The Secretary-General must find innovative measures to address this and the issues he raised require decisions by consensus. Most of the Secretary-General's proposals have to do with the symptoms of the diseases, rather than addressing the root causes, which are arrears by some States. The Advisory Committee's recommendations help resolve these root causes.
OMAR HILALE (Morocco) said that when the Organization faces an extraordinary budget crisis, an out-of-ordinary approach is needed which might challenge the culture of the Fifth Committee. The Secretary-General, elected by Member States, must have leeway in budgetary matters. His report sounded the alarm. The Organization is like a patient in cardiac arrest. Morocco fully supports the Secretary-General's proposals. You don't need a consensus when the matter is urgent, he said, insisting that decisions can be taken by a majority.
NABEEL MUNIR (Pakistan) said that as of March 2019, the United Nations owed $265 million to troop- and police-contributing countries, turning them into the de facto major financers of United Nations peacekeeping. His delegation understands that 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. Unspent funds for peacekeeping operations as well as the debt owed to Member States for closed peacekeeping missions should be returned in full. Annual budgeting would translate into a more effective budget methodology, resulting in better costing through real vacancy rates and higher levels of staffing.
TOSHIYA HOSHINO (Japan) said that his delegation looks forward to discussing in a constructive manner all proposals of the Secretary-General to find the most effective and feasible solution to the current financial situation. The Fifth Committee faces a time constraint to discuss this agenda during its current resumed session in which time-bound negotiations are under way on peacekeeping budgets. Japan is of the view that priority should be given those proposals related to the financial mechanism of peacekeeping budgets.
LUIZ FELDMAN (Brazil) said his delegation has supported the establishment of an annual regular budget, which it trusts will lead to greater budgetary discipline. In resolution 72/266, the General Assembly categorically decided not to change the mechanisms and levels of discretionary managerial authorities of the Secretary-General. His report disregards and greatly exceeds the mandate contained in that resolution. It seeks to transfer all budgetary discretion to the Secretariat. Member States would be left with the sole task of establishing a global budget number, or ceiling, without a say in the level of resources for each budget line. This would amount to replacing the time-honoured oversight system enshrined in the United Nations Charter with virtual budgetary autonomy for the Secretariat. Authority would be transferred to a bureaucracy that remains beset by insufficient transparency and geographical representation, he said. Brazil does not endorse the report's statement that the budget methodology and regulatory framework of the Organization are outdated, he said. The Charter is a source of strength, not of structural weaknesses. His delegation also seeks clarification about why the report failed to address one of the root causes � 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. The Secretary-General's report may bring more harm than good to the Organization.
FU DAOPENG (China) said that if Member States, especially those significantly in arrears, don't pay their dues on time, no reform measures would be able to solve the United Nations liquidity problem. Reform initiatives aimed at improving the Organization's financial situation should be strictly in line with the spirit of the United Nations Charter and adhere to the principle of leadership by Member States. Reform of the methodology for the regular budget should take into full account the impact of switching to an annual budget beginning in 2020 on a trial basis.
United Nations Mission to Support the Hodeidah Agreement
CHANDRAMOULI RAMANATHAN, Controller and Assistant Secretary-General for Programme Planning, Finance and Budget, introduced the Secretary-General's report on the United Nations Mission to Support the Hodeidah Agreement (document A/73/352/Add.9), explaining that it represents a full budget proposal for the mission which takes into consideration the most recent developments and supersedes prior requests for commitment authorities. It puts estimated total resource requirements for the period from 21 December 2018 to 31 December 2019 at $57.9 million, comprising estimated expenditures of $171,600 for 2018 and estimated resource requirements of $57.7 million for 2019.
The requirements would provide for the deployment of up to 75 United Nations monitors, 69 international and 69 national staff positions and five Government-provided personnel, he said. Provisions have also been made for one rotary-wing and one fixed-wing aircraft, as well as for the acquisition and maintenance of armoured vehicles and the provision of medical services and communications and information technologies. Noting that a rented marine vessel is now being used by the Mission for short-term office and living accommodations, he said the report also makes provisions for the rental, renovation and security enhancement of ground facilities in the longer term.
Mr. TERZI presented the Advisory Committee's related report (document A/73/498/Add.9), saying that in view of the slower than anticipated pace of the Mission's start-up, the ACABQ recommends a reduction of 2 per cent � or about $1 million � under operations costs. Expressing concern that the Secretary-General is proposing to carry forward to 2019 the amount apportioned against his $8 million authority in 2018 to enter into unforeseen and extraordinary expenses does not align with the terms of General Assembly resolution 72/264. It therefore recommends that he observe the limits and provisions set by the Assembly.
Source: United Nations