Friday, 26 January 2024 | New York | Executive Office of the Secretary-General (EOSG)
Secretary-General's letter to staff on UN financial situation
Dear Colleagues,
I am writing to draw your attention to the unfortunate deteriorating financial situation of our regular budget operations.
I have written to Member States to inform them of the situation and to alert them that we are now forced to implement aggressive cash conservation measures to avert a default in meeting the legal obligations of the Organization. I have also reminded them that the ultimate responsibility for our financial health rests with Member States, and I encouraged them to pay in full and on time.
The main cause of the liquidity crisis is this: not all Member States pay their assessments in full. In 2023, we collected 82.3 per cent of the year’s assessment, the lowest in the last five years. Only 142 Member States paid their dues in full – again, the lowest in the last five years. As a result, year-end arrears climbed to $859 million, up from $330 million in 2022.
A secondary cause of the liquidity crisis relates to a shift in the payment patterns of Member States, including the unpredictability of both the timing and the amounts of anticipated collections. In 2023, collections trailed estimates throughout most of the year. We ended the year $529 million short of anticipated collections.
Structural weaknesses in our budgetary process further contribute to liquidity constraints. These include the inability to assess for new mandates arising during a budget period, intergovernmental decisions to execute additional mandates “within existing resources”, and the return of unspent funds to Member States without offsetting it first against their outstanding contributions. We are forced into an absurd situation where we must return funds we could not spend because we did not receive the cash, even to those who did not pay their assessments in full.
We were able to partially mitigate the operational impact in 2023 because we had started the year with about $700 million in cash, including our liquidity reserves, and had imposed spending restrictions from mid-July. Notwithstanding these measures, these liquidity reserves were exhausted by October, and after some collections in November and December, we ended 2023 with only $60 million left in the reserves.
As you know, we have been working closely with Member States to address the liquidity challenges. In response, Member States have provided some systemic support over the last few years to alleviate the liquidity problems of the regular budget and peacekeeping operations. For peacekeeping operations, the General Assembly approved cash pooling, advance assessments and the use of the Peacekeeping Reserve Fund to meet shortfalls in peacekeeping operations. For the regular budget, the General Assembly increased the level of the Working Capital Fund by $100 million from January 2023. We have also been allowed to borrow temporarily from the surplus cash of closed tribunals. These measures were helpful in addressing the liquidity challenges and we will continue to draw on these in 2024.
However, we expect the regular budget liquidity situation to be far more challenging in 2024, as we are starting with very little cash. In order to avoid a payment default throughout the year, while dealing with the unpredictability of intrayear collections, our initial estimates are that we will need to conserve around $350 million in cash by slowing down and reducing spending until we have certainty that we have enough cash to meet our obligations each month. This means that we will have to introduce spending restrictions right away or risk running out of cash by August, including the liquidity reserves and the surplus cash of closed tribunals.
Protecting staff from the liquidity crisis to the maximum extent is a priority for me. I have repeatedly made every effort to do so over the years and I will not relent in doing everything possible to mitigate any pressure on you.
However, the reality is that personnel costs account for more than 70 per cent of the regular budget. In order to ensure liquidity for paying staff salaries certain difficult steps will be necessary. Hiring restrictions will need to be maintained during 2024. I am keenly aware that this will have a knock-on effect. High vacancies put an added burden on staff – especially those who work in entities with high vacancy rates. This step is essential if we are to have any hope of ensuring sufficient cash inflows.
Restrictions in non-post spending will also be critical to bridge the liquidity gap. As a result, until the situation improves, official travel will need to be limited to the most essential activities. Purchases of goods and services will be postponed, unless absolutely critical. Hiring of consultants and experts will be minimized to the extent feasible. Most construction and maintenance projects will be suspended, except where the slowing down of major construction projects would result in significant future additional expenses. We will implement energy-saving and other measures to reduce utility bills and curtail expenses on managing facilities. Non-essential security expenses will also be curtailed, as long as they do not impact the safety of our premises, assets and of our personnel and delegates.
I have asked relevant senior managers to engage with Member States and outline the potential impact on our ability deliver on our mandates, including support to intergovernmental meetings across duty stations. The Department of Management Strategy, Policy and Compliance will work with senior managers to help deal with the impact of these measures. We will monitor the cash flows carefully and adapt to the evolving liquidity situation.
Member States have been very supportive of my proposals regarding the budget for 2024 and have made positive decisions on initiatives, such as establishing two new offices for Anti-Racism and for Data Protection, increasing funding for core activities of UNRWA, increasing resources for development and human rights activities and strengthening the Peacebuilding Fund with assessed contributions from 2025. However, budgets approved without adequate cash to execute them undermine the essence of the process.
We will also continue to urge Member States to ensure that every effort is taken to avoid any erosion of our capacity to deliver, while working with them to find a sustainable solution that supports staff and enables the United Nations to sustain its operations.
The work of the United Nations has never been more vital. You are central to our success. I regret that we are faced with these challenges which are not of our making. But with your continued dedication and support, we will overcome this crisis and ensure that our Organization can continue to fully perform its vital mission for the people of the world.
Yours sincerely,
António Guterres
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