As the 80th session of the United Nations General Assembly (‘GA’) high-level week draws to a close, the time has come for the GA to get busy with discussing the pressing issues on the table. Among them is addressing the precarious financial position of the UN. The UN already broke the record in 2023, with uncollected funds amounting to $ 859 million (here, para. 8). Since then, the Secretariat has continued to tighten its belt to reduce spending until the Organization secures enough cash. This has impacted the activities of the UN (discussed here concerning the ILC). The situation is likely to persist, or perhaps even worsen (see e.g. here, para. 9), as major contributors are expected to delay and may refuse to pay the assessed contributions following a unilateral review. Despite the UN80 initiative being underway, this process has only just begun, which would require not only time but also, ultimately, the political will of the member states.
What are some options that the UN may consider in the meantime, particularly to secure cash? This blog post tackles this question from three aspects. It begins by recalling how the UN has addressed cash deficit problems in the past and the limits of these existing approaches. Next, it examines whether introducing measures such as authorising the Secretary-General to borrow can be legally justified under the present Charter. The post concludes by highlighting some key points for responding to a call for liquidity and considerations for the reform to succeed.
Lessons to Learn from the Past: Previous Solutions and their Limits
The GA has introduced various measures to secure cash whenever the UN was in a similar situation in the past. While it is not clear exactly when the UN declared a state of financial emergency, two observations can be made. One is that the financial situation of the UN is holistically assessed based on the following criteria: assessments issued, unpaid assessed contributions, available cash resources that can be borrowed, and the Organization’s outstanding payments to its members (see e.g. here, para. 2). The other is that the process of reviewing options to secure additional measures has usually been steered through a three-step process. The Secretary-General provides an analysis of the financial situation faced by the Organization and makes any necessary proposals. The Advisory Committee on Administrative and Budgetary Questions and the Fifth Committee then examine the analysis and proposals presented by the Secretary-General. Lastly, the GA takes note of the reports, where required requests further updates to be presented in the forthcoming session, and either decides on or approves any measures to be implemented.
Some of the obvious solutions have included requesting additional financial support from member states through such means as voluntary contributions. For instance, even after the ICJ had rendered the Certain Expenses advisory opinion, some member states continued to refuse to pay their dues for peacekeeping operations. Against this background, the GA decided that ‘the financial difficulties of the Organization should be solved through voluntary contributions by Member States, with the highly developed countries making substantial contributions’ (see also here, pp. 3-4). Members are also not prevented from paying their assessed contributions forward, as some states have paid their contributions for the following financial year (see e.g. here, para. 12).
Other options have involved utilising what has already been collected. Since funds were collected either to be spent within the designated financial year or for a particular purpose, using these funds required the GA’s approval. These options were, inter alia, the temporary suspension of financial regulations (particularly Regulations 5.3 and 5.4) to prevent unspent appropriations from being credited back to member states. Cross-borrowing funds from different accounts to cover the deficit faced by the UN has also been considered when the Working Capital Fund and the Special Account are insufficient to meet short-term expenses, both of which were established to address financial needs in the event that funds are not collected in full and on time. Most recently, pooling cash from active peacekeeping operations is being tested (A/RES/76/272, para. 7).
These solutions, however, are not without problems.
While the UN may be tempted to collect funds through voluntary contributions, not only is there a risk of shifting the financial responsibilities of recalcitrant members to other member states, but it may also appear as if the Organization were granting an exception to those who failed to pay their assessed contributions. As such, if the GA were to use this option again, it should be clearly conveyed that receiving voluntary contributions does not replace existing obligations. From a practical standpoint, it is uncertain how much the UN can collect from member states through voluntary contributions. In 2023, for example, voluntary contributions already accounted for approximately one quarter of the total revenue received by the Organization (see here, p. 14). It does not mean, however, that voluntary contributions can only be made by members, as the UN has also received both earmarked and non-earmarked contributions from non-member stakeholders, such as NGOs and the private sector (see here).
The problem with returning unspent funding is that the surplus must be returned to the member states without conditions, even to those who did not fulfil their financial obligations, and even when the Organization is in a state of financial emergency. As aptly explained in a report by Secretary-General António Guterres, the UN is left in the position of having to return funds to member states that have not even been collected (para. 16). It seems probable that the reduced cycle will exacerbate the liquidity situation in the short term, particularly since the financial cycle recently changed from biennial to annual, which would also expedite the return process (A/RES/77/267, para. 3).
Introducing exceptions via GA resolutions to existing internal mechanisms is also undesirable. Notwithstanding the Charter bestowing the GA with the powers to adopt decisions on budgetary matters (Art. 18(2) UN Charter), introducing exceptions by simply adopting a resolution clearly overcomplicates the existing framework that governs financing, even if it may be a temporary measure. One will need to put together the pieces to complete the puzzle on how financing works for the UN. More fundamentally, cash-pooling is subject to the availability of cash resources, which are not unlimited.
The Legality of External Borrowing and Revenue-making
What can be done further by the UN? Can it borrow externally, or, perhaps even create its own revenue? If so, what are the legal bases for resorting to such measures? These questions are pertinent to ask when the constitutionality of such measures, particularly concerning the UN engaging in borrowing activities, has been challenged in the past (see e.g. the Union of Soviet Socialist Republics, paras. 235-36). Such arguments, however, are hardly convincing when Art. 18(2) of the Charter clearly bestows the GA with the authority to decide on budgetary questions with a two-thirds majority of the members present and voting. Not even considering teleology or the doctrine of implied powers (see Effects of Awards advisory opinion, p. 57), the language of the provision appears broad enough to contend that the GA may be creative, at least concerning budgetary questions.
Such an interpretation further gains support in practice because the GA had, in fact, approved the UN to engage in extraordinary activities of this kind. For instance, the UN issued postage stamps to generate revenue. Resolution 35/113 deserves particular attention in this regard, as it suggested issuing postage stamps as one of the interim solutions to enhance the UN’s liquidity. Sale proceeds were even given special treatment, as they were exempt from the financial regulations that would have been applied to them otherwise (see former Regulations 5.2 and 7.1). Regulation 4.16, currently in force, even provides that the Secretary-General may make investments with ‘moneys of the Organization not needed for immediate requirements’.
The practicality of introducing such measures may be questioned. For instance, the net revenue from the sale of postage stamps totalled around $ 1.25 million (para. 2), which accounted for 0.00085 % of the total income received in 1982-1983 (see here, p.3; see also, para. 20) The lack of available means to invest, and the uncertainty about the success of the investment would raise eyebrows. These examples, however, serve as evidence that the UN is not prevented from engaging in commercial transactions. As such, the GA may consider introducing a revenue-creating scheme, which could be achieved by learning from other international organizations (see e.g. Schermers and Blokker, pp. 752-62) or even revisiting ideas that have been proposed in the past (see e.g. Stoessinger, Part III; Hüfner, Chapter 5).
External borrowing and issuing bonds are also not impossible. For instance, U Thant, then acting Secretary-General, was exceptionally authorised by the GA to issue bonds worth up to $ 200 million, pursuant to Resolution 1739 (XVI), with actual sales totalling around $ 170 million (p. 104). The bonds were to be repaid annually in 25 instalments to those who had purchased them, which were fully paid in 1989 (Part VII, Section 30). Pursuant to Resolution 1448 (XIV), Dag Hammarskjöld was authorised to take out short-term loans from governments upon need (para. 4(b)). Although the proposal was eventually rejected by the Fifth Committee (para. 42), the Advisory Committee on Administrative and Budgetary Questions even went so far as to propose, albeit with some reluctance, that the Secretary-General be granted the authority to borrow from the commercial market on an exceptional basis (para. 9).
This option warrants further examination, as the UN may consider borrowing cash if all available resources are depleted. A question may arise as to whether the Secretary-General could borrow from the governments of member states should he wish to do so, based on a previous practice of the Organization. There was a brief period of time during which the GA referred to the resolution that had authorised the Secretary-General to borrow from member states (see A/RES/1586 (XV); A/RES/1736 (XVI)). As Secretary-General, Kurt Waldheim seemed to have thought that the authority to borrow temporarily from the member states had already been affirmed in principle by the GA. Although he did not exercise this authority, it seems clear that his view differed from his understanding of borrowing from commercial markets, for which he considered that additional authorisation would be needed (para. 34).
It seems difficult to accept that the previous authorisation granted by the GA remains valid to this day. While the present Secretary-General may not be prevented from engaging in external borrowing, he will need to obtain approval from the GA. Such a view coincides with that of the Legal Counsel, which opined in 1995 that the Secretary-General cannot engage in borrowing activities unless the GA grants him such authority. It further opined that the relevant financial regulations have been
consistently interpreted as excluding, per se, borrowing activities, because only appropriated funds (i.e., funds that are available within the budget, in accordance with the Financial Regulations and Rules) can be expended. (pp. 432-34)
This legal opinion still holds because the content of the regulation that established the basis for rendering such an opinion remains unchanged: the Secretary-General is provided limited authority ‘to incur commitments and make payments’ according to what has been apportioned by the GA (now reflected in Regulation 5.1).
More importantly, borrowing is not free money. Member states will have to repay the loan, likely with added interest (see e.g. here, para. 7; here, para. 12), unless it is provided interest-free (see e.g. from Switzerland, A/RES/70/248, para. 19). In this regard, it is not surprising that in 1993 the Independent Advisory Group on UN Financing was reluctant to recommend that the UN engage in such activities, as the UN is neither a commercial entity nor a national government, but one that relies on financial support from member states (para. 44). It was also feared that easy access to funds outside the Organization might give member states leeway to delay their payments, further exacerbating the UN’s financial situation in the long run (para. 45). Be that as it may, seeking funds outside the UN’s ordinary financing mechanism is not entirely ruled out as an option.
The Need to Look Beyond Responding to the Problems
This post is not a proposal that the Organization should indulge those who fail to pay their dues in full and on time. As emphasised in a post written a year ago on this blog, members paying the dues that the GA approved in full and on time is at the crux of resolving the liquidity problems faced by the Organization. However, we cannot simply wait and watch the financial situation deteriorate. As such, this post aimed to direct readers to potential options that can be considered in the short term and as a last resort. While these measures would need to be approved by the GA, they are not impossible. Should the members fail to arrive at a conclusion, however, there is no option but for the Secretary-General, as the chief administrative officer, (Art. 97 UN Charter) to execute the programmes based on available means (see further in UNJY 1982, pp. 190-91; UNJY 2006, p. 465), which would inevitably continue to negatively impact the UN’s capacity to fulfil its tasks.
Various voices are being raised and will be raised about the reform, but we should be mindful that it is not the first time that a call for reform has been made. Before undertaking any reforms, it is essential to take a step back and ponder what lies at the core of the problem. At least two things are clear about UN financing. One is that the UN lacks the means to collect the funds effectively. The other is that the Organization has been heavily reliant on a small number of states to fund its activities. The success of the reform cannot be guaranteed if the members decide to shy away from these problems. On the bright side, financial reform is one of the few sectors where effective measures can be implemented without amending the Charter, provided that the political support is obtained from at least two-thirds of the members.
The UN is at a critical juncture. We can only hope that the members seize this opportunity to make meaningful contributions.
