Global Policy Forum

The UN's Own Financial Crisis


By Conor Foley

July 22, 2009

Underfunded UN aid agencies are struggling to meet their commitments to the world's poor - but politicians will not help

The announcement that the United Nations has a record $4.8bn funding gap for its 2009 aid programmes may not strike some observers as news. For the last two decades, in particular, the UN has lurched from one financial crisis to another. Although the size of the latest shortfall is unprecedented, the basic problem is that the world's politicians have consistently failed to stump up the resources that the UN needs to fulfil the tasks that they demand of it or to set up a system of effective managerial oversight and planning in the organisation.

The current global recession has clearly put pressure on the aid budgets of all donor countries and the UN's humanitarian assistance budget has faced two recent unexpected calls on its resources. Last December the UN's world food programme announced that the spike in food prices meant that it was struggling to meet its commitments to feed 49 million people in 12 of the world's most hunger-stricken countries. Warehouses for some of its most critical operations were running out of food and it was planning to cut rations, including to Zimbabwe and Ethiopia. More recently, the Pakistani army's offensive against Taliban militants has caused more than two million people to flee their homes, causing a ten-fold increase in needs in the country.

The UN's emergency relief co-ordinator John Holmes said that he had received less than half the $9.5bn sought for humanitarian work this year. "It is clear that the global recession puts pressure on the aid budgets of all donor governments, but of course it puts immeasurably more pressure on crises-stricken people in poor countries," he added.

The problem is one of political will rather than lack of money. The UN funds its operations through a mixture of assessed and voluntary contributions by member states. Its specialised agencies depend on a combination of these sources to fund their operations. The regular budget now only accounts for around 10% of total expenditure, with agencies relying on voluntary contributions for the rest, which makes the process of budgeting extremely difficult.

In 1994 the entire UN emergency peacekeeping and humanitarian aid budget was around $4bn - about the size of the New York fire brigade's. However, even then the United States government was complaining about the UN's "astronomical costs" and withholding funds in protest. The following year, it unilaterally cut its contributions and forced the rest of the world to agree a cap on its contributions. Since then, peacekeeping costs have more than tripled, but the UN's regular budget has completely failed to keep up, which has led to a constant round of alarmist-sounding financial appeals ever since.

The UN has faced similar problems throughout its history, although on a lesser scale. There were disputes over how to pay for its first big peacekeeping operation - in Congo - in 1970, and the UN had to issue bonds to tide it through. In those days, it was the Soviet Union who headed the list of defaulters, withholding money in protest at its policy difference with the rest of the UN general assembly.

By the 1980s the pattern had been reversed and it was the Reagan administration in the US that had adopted a policy of "withholding" its contributions as a form of exerting political leverage. The US deliberately underpaid its dues, withdrew its support entirely from one UN aid agency and delayed other payments as a means of creating financial crises within the organisation. Although most of Reagan's successors adopted a more constructive approach, hostility to the UN had by then become an article of faith in the US Republican party, which have continued their campaign of financial disruption in Congress and the Senate.

By choking off funds at critical junctures these greatly exacerbated the problems faced by UN peace-keeping missions in Rwanda and Bosnia-Herzegovina and so turned many of their criticisms of the UN into self-fulfilling prophecies. Even today the big operations in Darfur and the Democratic Republic of Congo remain grossly under-resourced. The hollowness of Republican attacks on the UN's supposed "waste and inefficiency" have also been highlighted by the mind-boggling costs of US operations in Iraq and now Afghanistan.

While President Obama has reversed the entirely counter-productive approach of his immediate predecessor, any serious attempt at UN reform needs to address the issue of financing in a more systematic way. The current set-up probably ends up generating far more waste and inefficiency since it forces each agency to compete for short-term funding, which encourages inter-agency turf-wars and militates against long-term planning in the UN system as a whole. It would cost around 1% of the money thrown at western banks in the last six months to bridge the current humanitarian deficit. Yet politicians will continue to play a game of cynical brinkmanship over where the money should come from, confident that it will be the UN itself that gets blamed for the resulting deaths and human misery.


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