United Nations: Cash Strapped?
November 22, 2019 | Expert Insights
The Financial Crisis
On 08 Oct 2019, Antonio Guterres, the UN Secretary-General (SG), speaking at the Budget-setting meeting of the 5th Committee (Administration & Budget Committee), said the organization was facing a most severe financial crisis. His amplification was curt and to the point, “The equation is simple: without cash, the budget cannot be properly implemented. Thus, UN plans are currently NOT being implemented by programmed planning but by cash availability”.
As on 04 Oct 2019, 65 nations had failed to pay their share in full; amounting to a shortfall in cash of US$ 1.38 billion. With more than a third of UN member states, not having paid their dues, the SG did not mince words. He admitted that the UN was so cash-strapped that it had been forced to borrow reserves, set aside for peace-keeping operations. In doing so, the UN was entering Nov 2019, without enough cash to cover the payrolls of peace-keeping soldiers. The grim reality is, not only peace-keeping soldiers but UN employees across the organization, risk not being paid, in Dec 2019.
The US, the largest contributor to the UN budget; still owes the UN, US$ 381 million for previous budgets, in addition to US$674 million, for the current year. In regard to the US payment-default, President Donald Trump said that the US is shouldering too much of the UN’s financial burden. Besides the US, five other G-20 countries are yet to pay their dues; namely, Argentina, Brazil, Mexico, South Africa and South Korea.
How Are Contributions Made to the UN Budget?
According to Article 17 of the UN Charter, the expenses of the UN shall be borne by member states, as apportioned by the General Assembly (GA). As per current formulations, the amounts paid by member states vary; determined on several factors including Gross National Income, capacity to pay, external debt etc. The five permanent members of the Security Council pay more, with the US paying the most at 22% of the UN budget. Russia pays 2.4%, UK 4.5%, France 4.42% and China 12%. India’s contribution is 0.8% of the UN budget, which works out, little less than US$ 24 million. In fact, as on March, the UN owed India $ 38 million on account of its peacekeeping contributions. The UN general budget is different from the UN peacekeeping budget, for which nations contribute, separately. For several years now, the UN peace-keeping budget has exceeded that of the UN General budget.
What can the UN Do About Defaulting Member States?
The UN SG has written to member states saying that if member states do not pay dues on time, the UN already has depleted its reserves, may be forced to default on payments, to staff and vendors. According to Article 19 of the UN Charter, a member state in arrears in payment of dues, in excess of two preceding years, can lose its vote in the General Assembly. However, the large number of defaulting nations and the high threshold (excess of two preceding years), makes this provision ineffective, in the current context.
As part of pre-emptive cost-saving measures, the SG has announced a slew of emergency directions; to include, vacant positions shall not be filled, travel will be curtailed, and meetings will have to be deferred or cancelled. Other extraordinary measures like stopping the use of escalators, reducing air-conditioning and heating have also been considered, in some UN offices. These cost-saving measures, directly affect the UN’s operational efficiencies.
Analysis
The current crisis has much to do with the UN’s troubled relationship with the US. However, the politics over UN dues, first began in the 1960s, when the former USSR and France withheld dues, to protest what they perceived as the misguided peace-keeping mission, in Congo. From mid-1980s, it became US policy to threaten reduction in annual contributions to UN agencies, if Israel its key-ally, were either expelled from the UN or any other harsh measure were taken against it. Thus, hectoring and threatening UN agencies with cessation of funding, remains common practice. In addition, the US has consistently protested that its’ contribution to the UN budget was, disproportionate and unfair.
Counterpoint
While the P5 and the larger contributors may bicker about their proportionately larger shares, the fact remains that their nationals share the largest pie of cushy UN employment in the over-staffed UN HQs in New York and in other plum locations. Citizens from developing countries of Asia and Africa find it extremely hard to make an entry into the UN system and even if recruited at lower levels, rarely reach the higher echelons. In most cases, they man the outposts in remote and disease-ridden war-ravaged hell holes all over the world.
The UN administrative processes and the bureaucracy models itself on the US with similar lavish standards, even when deployed in peacekeeping missions. The ration scales, the Mission Sustenance Allowances (MSA), the Office Contingencies are at a scale which would appear lavish even by western standards. It is a known fact that a large part of a peacekeeping budget is consumed by the establishment cost of the UN mission HQ itself. The UN, therefore, needs to take a real close look as to how to reduce its own internal budget in terms of salaries, office management systems, transport pools etc.
Assessment
- As on 15 Nov 2019, the US has still not paid its dues. While it is unlikely that they will fulfil their complete commitment, a substantial payment of dues should hopefully, overcome, the immediate crisis will. However, repeated cash shortages are making UN programs less effective and that is unfortunate. The world body extends reach to many trouble spots in the world, providing much-needed assistance and mitigating human suffering. What should the UN do to prevent the re-occurrence of such cash shortages?
- Perhaps, the UN should introduce a penalty for late payments? In the past 20 years, there has not been a single year in which, all member nations paid their dues, on time (31 January). Further, the rate of the fine should be more for longer delays. Such a measure would make member states more inclined to be disciplined, in paying their dues.
- It is also prudent to consider President Donald Trump’s demand to reduce US share, in the UN budget. Emerging countries like China and India should seriously consider increasing their commitment to the world body and concomitantly take on more responsibility, with global governance.
Image Courtesy: havanatimes.org