Exclusive: “Without Aggressive Cash Conservation Measures,” UN Could “Default on Its Legal Obligations,” Warns Antonio Guterres

The severity of the liquidity crisis of the UN, first revealed by The Geneva Observer and outlined in a December 28, 2023, interoffice memorandum by the organization’s controller, has now been confirmed by a subsequent letter from the UN Secretary-General himself, dated January 25, 2024. Antonio Guterres’ note, obtained by The G|O and previously undisclosed, leaves no doubt about the financial woes of the organization: “We are now forced to implement aggressive cash conservation measures to avert a default in meeting the legal obligations of the Organization,” Antonio Guterres writes in his internal letter to all UN Global Secretariat personnel, telling them that he has “written to Member States to inform them of the situation.”

In explaining the continued deterioration of the organization’s finances, the UN Secretary-General lays the blame squarely on the Member States that haven’t paid their dues. In his three-page letter, Guterres writes: 

“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.”

Guterres’ note “confirms that what has always somehow been presented as a temporary emergency is actually a semi-permanent crisis,” a UN insider familiar with the situation told The G|O. The letter clearly supports that interpretation, warning of further difficult days ahead. If, over the last few years, Member States have come to the financial support of the organization and helped to alleviate the liquidity problems of the regular budget and peacekeeping operations, “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, […] our initial estimates are that we will need to conserve around $350 million in cash,” cautions Guterres.

Among the new remedial measures to be implemented immediately—which will supplement cost saving measures already deployed, such as energy-saving measures and a reduction in utility bills—official travel will now be limited, purchases of goods and services postponed, and the hiring of consultants and experts minimized.

But the measure with the potential to have the most drastic effect on the organization’s performance—and morale—is the continuation of a hiring freeze that many here had hoped would only be temporary. “Protecting staff from the liquidity crisis to the maximum extent is a priority for me […] I will not relent in doing everything possible to mitigate any pressure on you,” writes Antonio Guterres.

For many here, however, the reassurances of the Secretary-General are not entirely convincing. “This is not a liquidity crisis, this is a budget crisis, and it should be recognized as such; it’s not simply about managing the cash-flow,” a UN source familiar with the situation told The G|O. “It has gotten worse and worse over the years, and always with the same consequence: the workload of the staff keeps increasing. Ultimately, the fear is that by continuing to do more with less, we are telling the Member States that the UN can continue fulfilling its mandate without being properly funded.”

Another concern expressed here by the UN staff is the lack of transparency in the way exceptions to the hiring freeze might be negotiated. As it stands, decisions to grant possible exceptions rest only with the Controller and the Human Resources director in New York. Sources tell us that there are no guidance or criteria to determine how exceptions will be granted to the entities applying. In response to a question by The G|O on how the process was being conducted between Geneva and New York, Alessandra Vellucci, Director of the UN Information Service in Geneva, confirmed that there was no coordination. “They decide and we just apply the decisions,” she told us. Some UN watchers note that in a top-down organization like the UN, unaccustomed to transparency, the management of the crisis may prove challenging. 

UN specialized agencies are not directly affected by the financial situation. But OCHA, OHCHR and peacekeeping operations are impacted, and the effects will be felt in the field: “This is particularly worrisome, as the UN is often the only organization present in countries where the most vulnerable populations are in need of help,” a senior European diplomat told The G|O, adding “in the current context, granting visibility and predictability to the UN in managing its finances is not only indispensable, it’s a duty.” 

As host country of the UN, Switzerland’s Foreign Ministry told the G|O by email that “it is very concerned about this recurring liquidity crisis. Switzerland regularly calls on other member states to pay their annual contributions. It is important that all states, regardless of the amount of their contribution, settle their accounts as soon as possible, to enable the UN to continue its work. In the event of late payment, we ask all member states to inform the UN in a transparent manner of the date on which the organization can expect to receive payment. This transparency would enable the organization to plan its cash flow accordingly.”

As we previously wrote, the financial crisis, long in the making, is undoubtedly linked to current global geopolitical dynamics. It comes at a moment when the UN is already facing a political crisis, and against the backdrop of a growing debate about the effectiveness of global governance and a push for reform. “We need to ask what this crisis means in terms of the future of these institutions,” one senior diplomatic source told The G|O. Other sources go so far as to say that for some Member States, dragging their financial feet could indeed be politically motivated.

With so many Member States delinquent in their payments, some UN watchers here are now openly staring to wonder if this is deliberate. “Death by cuts? Multilateralism à la carte, where some parts of the system are funded and others not? Is this a way to weaken the UN? I think the question needs to be asked,” a seasoned expert and defender of the multilateral system told The G|O.

-PHM