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Show Me the Money
Question by Ethan Gelber

The Question:

In September 2000, New York City was besieged by world leaders present to attend the year 2000 United Nations Millennium Summit. The landmark U.N. General Assembly meeting was billed as the largest-ever gathering of world leaders. And what happens when so many important people get together? Well, no surprise, they talk about money.

In fact, one of the agenda items was the serious financial crises faced by the United Nations. As of May 2000, the 189 Member States owed the U.N. more than $2.9 billion for peacekeeping, international tribunals, and normal operations. (The United States was the biggest offender, owing more than $1.8 billion.) Unfortunately, since the U.N. does not have the right to borrow from commercial institutions, it is in a bit of a bind.

There are three questions:

How does the U.N. determine how much to assess each of its Member States?
What safeguards are there to guarantee that the U.N. receives what it is due?
In the absence of an ability to borrow, how has the U.N. survived the last few years?

The Answers:

Dues assessment follows the terms of the original 1945 U.N. Charter and is calculated according to a formula and on the basis of each country's share of the world economy and ability to pay, all as approved by the General Assembly.

The only safeguard created to require each Member State to pay its dues is written into the U.N. Charter. Article 19 declares that at the beginning of any year, if the amount of a country's"arrears equals or exceeds the amount of the contributions due from it for the preceding two full years," it loses the right to vote in the General Assembly. It does allow that "The General Assembly may, nevertheless, permit such a Member to vote if it is satisfied that the failure to pay is due to conditions beyond the control of the Member."

The U.N. relies exclusively on the Member States for funding. Unfortunately, and despite what the Charter stipulates, many countries do not pay on time or in full. Sometimes this is due to real financial constraints; other times it may be due to political maneuvering; in a few cases, a nation's budgetary technicalities are too complex for timely dispensements.

Unfortunately, the U.N. does not have the authority to borrow from commercial institutions. Today, due to increased financial woes stemming from Member States' late payments, the U.N. financial crisis is more and more serious. As of May 31, 2000, Member States' dues were $2.9 billion in arears, of which $2 billion is for peacekeeping, $821 million for regular operations, and $83 million for international tribunals. The United States is the most behind in paying its dues, owing $1.8 billion (which includes $460 million for operations and over $1.3 billion for peacekeeping and international tribunals).

In the absence of being able to borrow from the outside, the U.N. basically borrows from itself. In other words, it pays for its underfunded general operations by borrowing from peacekeeping funds. Consequently, the U.N. is not able to pay (at least not regularly or promptly) Member States that provide troops and equipment for peacekeeping. At the end of 1999, the UN was in arrears to 72 countries for a total of $800 million.

The problem is that in the past few years, there have been fewer peacekeeping operations. With fewer operations, there has been a lower cash demand and the peacekeeping accounts have not been as large as in the past ($800 million in 1999 from a high of $3 billion in 1995). This means that there is less money available from which to pull for general operations. New missions in the year 2000 will boost this figure again, but the problem remains the same. If Member States do not pay their bills, the current crisis will only get worse. Fortunately, in 1999 126 countries paid on time and in full, compared to only 75 in 1994.

The Winners:

Our winners this week are: Tim Vander Haar, Steve Yates, and Shea Phillips.

THANKS for your contributions!