PRESS CONFERENCE ON UN BUDGET

29 November 2005

PRESS CONFERENCE ON UN BUDGET

29/11/2005
Press Conference
Department of Public Information • News and Media Division • New York

Press conference on un budget


“This place does not run on air -- it runs on money”, United Nations Controller, Warren Sach, said at a Headquarters press conference this afternoon, as he addressed concerns over the possibility that funding would be provided for the Organization for three months out of the next biennium. 


Proposals for partial budget approval had been “floating around” in the press, but were not part of the informal consultations in the Fifth Committee (Administrative and Budgetary) at present, he said.


Providing an update on the status of budget negotiations, which had begun with the introduction of the budget proposal by the Secretary-General on 25 October, Mr. Sach said that the Fifth Committee had completed its formal debate on the matter on 28 October and had been in informal consultations since 10 November.  The Committee had yet to consider the text of the draft resolution on the budget -- that would be undertaken in December.  The usual adoption date was 23 December.


The $3.89 billion regular budget proposal before the Committee included some $73.4 million for reform activities resulting from the outcome of the September Summit, he continued.  The proposal did not include the funds needed for peacekeeping, the Capital Master Plan and the International Tribunals.


Returning to the “partial budget” proposals, he said that the Secretariat considered them a serious problem, in terms of the cash flow situation in 2006.  Cash requirements for the first quarter of the year would amount to some $450 to $500 million, but, based on a normal payment pattern, receipts that could be anticipated on the basis of a three-month budget would only reach $170 to $180 million.  That would leave the regular budget short of over $320 million for the first quarter of 2006.


Options to cope with a gap like that would be to draw on reserves, cut back on expenditures and borrow from peacekeeping missions.  The reserve option was rather uncertain, however.  Currently, the Organization had exhausted its working capital fund of $100 million and was using the special account of some $200 million, which had been voluntarily [contributed] several years ago to help the liquidity of the United Nations.  Unless large payments were made of arrears this month, the Organization would exhaust its available reserve by the end of the year and need to borrow from peacekeeping accounts.


Cutting back on expenditures could not solve the sort of a problem that would develop rapidly at the beginning of 2006, he added.  One could not actually drop payments fast enough to keep up with that sort of gap.  Thus, the real option was to find some way to borrow from peacekeeping accounts.  There was limited potential for the Secretary-General to do that on his own authority, but it was not sufficient.  While some borrowing was allowed from closed peacekeeping missions, there was a prohibition on borrowing from active missions, and the Assembly’s approval would be needed for that.


As the situation stood at the moment, Member States still had a lot of negotiating to do on the budget, so it was too early to speculate on the outcomes for the reform agreement and its consequences for the budget.  Various Committees were working hard on human rights, peacebuilding and management reforms.  A large number of complex proposals were before the Assembly following the Summit, and it took time for that machinery “to digest everything”.  He expected significant progress to be made on that front in the coming weeks, after which the budget and financing picture should become much clearer.


He added that, during the session, the Fifth Committee had moved quickly on several peacekeeping accounts:  it had already agreed to some $750 million extra for Haiti, Côte d’Ivoire and Sudan.  Yesterday, an informal agreement had been reached for $750 million for the United Nations Organization Mission in the Democratic Republic of the Congo (MONUC), bringing the total of peacekeeping approvals to some $1.5 billion.


Asked to provide a breakdown of the reform costs, Mr. Sach said that about half of the $73.4 million related to human rights items, and the next large component would be dedicated to peacebuilding.  The smallest element of the total related to management reform, including review of governance, strengthening of the Office of Internal Oversight Services (OIOS) and the establishment of an independent audit advisory committee.


To a series of other questions, he said that, normally, after the budget was adopted, the letters of assessment went out to all Member States for their share of the budget, which was determined according to the scale of assessments.  The response from Member States showed a pattern, under which some 38 per cent of the total would come in during the first quarter of the year.  Certain States, for instance members of the European Union, Canada, Australia and New Zealand tended to pay their whole dues early in the year.  Others had their own budgetary cycles and came up with the money later in the year.  The United States, which was assessed 22 per cent of the total, paid in the last quarter “on a consistent basis”. 


The problem that could arise in the first part of the year amounted to the fact that those countries that would pay early could only pay a quarter of what they would normally pay, because from a legal point of view, the assessment that they would receive would only amount to a quarter of the year’s requirements.


To a question about a United Nations contingency plan, he said that it was a matter of prudent financial planning to think how to cope in the absence of inflows, but there was no clear way of “working around” the situation where more money needed to go out than come in.  However, he could not say anything “from an official point of view”, because there had been no discussion in the Fifth Committee along those lines, either formally, or informally.


Asked about the situation that the United Nations would find itself in, should a crisis arise, Mr. Sach said that there would be real problems in terms of the Organization’s operational capacity.  As for the queries about whether offices would be closed, “elevators stopped and people sent home”, he said that he did not want to speculate on that at the moment.  The numbers were significant, however -- some 60 per cent of “outgoings” would not be covered.  It meant that, unless there was real flexibility shown by Member States in terms of the use of peacekeeping funds, there would have to be serious cutbacks in regular budget operations.  With most of the budget costs related to staff, any cutbacks could affect timely pay.  A freeze could also be effected on travel and purchases of supplies, furniture and equipment.  However, those were relatively small in proportion to the budget.


To a question about a precedent, he said that back in the 1970s, there had been a case when the budget was adopted on a provisional basis and then adjusted at the beginning of the year.


Asked if it would be difficult to finance the reform package if the decision on the regular budget were delayed, he said that the financing scheduling was dependent on the programme of work that had been agreed at the Summit -- a tight timetable to be completed between September and June next year.  A deferral of related budgetary provisions would put in danger the presentation of related reports due later next year.


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For information media • not an official record
For information media. Not an official record.