Global Trends by Martin Khor

Monday 19 June 2006

Battle looms as UN running out of funds

A battle is looming at the United Nations as the Secretariat runs out of funds at the end of this month.  Developed countries have tied releasing the rest of the UN’s budget to satisfactory reforms, but the developing countries are opposed to this kind of “economic blackmail”, and they also differ on what constitutes satisfactory reforms.

A big battle is looming over the operations of the United Nations as its Secretariat may run out of money by the end of this month.

That’s not because the UN has been over-spending, or that it has a limited budget.  It’s because the developed countries succeeded to authorize that only half the organisation’s 2006 budget be released.

The other half will be provided only if there are reforms to the UN in ways that satisfy the big countries, according to this scheme. 

Sources at the UN say the Secretariat is already making emergency plans to cut activities and lay off staff, in the event its financial lifeline is cut off.  Fears are growing that the UN’s many functions may be curbed.

The tying of the release of funds to “satisfactory reform” has been characterized by critics as “economic blackmail” and as the rich countries wielding the “power of the purse.”

Two months ago, the developing countries under the Group of 77 and China, did not agree to some of the reforms to UN management proposed by Secretary General Kofi Annan.

            Those proposals they found unacceptable would have transferred the authority of the General Assembly (the majority of whose members are the developing countries) to the Secretary General or to bodies where the developing countries would not be able (or so able) to exercise their majority power. 

The developed countries made clear they were unhappy with the G77 move and said there would be consequences, which many assumed was a veiled threat for their using “the power of the purse.”

By the end of this month, a decision will have to be made whether to release the rest of this year’s budget funds to the UN Secretariat.  The developed countries may decide to do so, for the good of all.

Or they may continue the drip-by-drip torture by advocating the funds be released on a month-by-month or quarterly-by-quarterly basis, so as to tie further release of the funds to further UN reform that is satisfactory to them.

Worse, they may try to block any more funds going to the UN at all.  This worst case scenario is not expected as it is too extreme. 

The G77 and China is taking this battle seriously.  Their Foreign Ministers met in Putrajaya on 29 May and took a strong stand on the “budget cap” and other issues related to UN reform.

And on 8-9 June the chairpersons of the G77 (who coordinate the group’s chapters based in New York, Geneva, Nairobi, Vienna, Rome and Paris) met in Vienna, and discussed how to follow up on the Putrajaya meeting.

The G77 is calling for the remainder of the UN’s budget to be released, and for ending the system of “budget capping.”

The statement from Vienna said the UN Secretary-General should receive adequate and predictable resources to undertake the UN’s numerous tasks.

“We regret the exceptional and unprecedented measure of restricting the expenditures of the Organization by authorizing the Secretary-General only to enter into expenditures limited to 50% of the approved budget of 2006,” said the G77 leaders.

“We underline that the measures imposed upon the Organization has adversely affected programme delivery in the Organization. We stress that this limit on the expenditure of the organization shall be automatically lifted upon the request of the Secretary-General at the appropriate time. We call on all Members States to act accordingly.”

Usually decisions are made by consensus at the UN (except in the Security Council where voting is a regular feature). 

However, with the G77 in a determined mood, it is possible the group will call for a vote to be taken if there is no agreement on releasing funds to the Secretariat.  The funds could then be released as the G77 members are in a majority.

The underlying fear is that if the United States is frustrated, it would then withhold the funds that it is obliged to contribute to the UN.  The UN would then face a deficit next year, as the US is the largest funder.

But this kind of behaviour would only detract from the already battered image of the US.

It remains to be seen how this potential crisis will play out or be diffused in the weeks ahead.