The UN could run out of cash within months
THE UNITED NATIONS headquarters towers majestically over Manhattan’s East River. Yet its escalators are often out of order, casualties of sweeping cost cuts by the secretary-general, António Guterres. He must hope that by forcing country representatives to climb up on foot he will save on maintenance and perhaps remind their governments to pay their bills.
On May 5th the UN will brief members on a previously unreported $600m (17%) cut to its $3.7bn budget aimed at avoiding default this year. It will include a hiring freeze while officials consider further savings that a Western diplomat describes as “moving jobs from New York to Nairobi”. Yet it may not be enough. A combination of deadbeat members and mad budget rules have led to a liquidity crisis. Now, a leaked White House memo proposing that America stop paying its mandatory contributions threatens a financial crash in the citadel of peace and security.
Last year the UN had a $200m cash shortfall, despite spending only 90% of its planned budget. This year will be much worse. Internal modelling suggests that the year-end cash deficit will, without cuts, probably blow out to $1.1bn, leaving the UN without money to pay salaries and suppliers by September. Most UN funding, such as for bodies providing humanitarian food or shelter, is voluntary, but the core functions are paid for through mandatory dues, linked to the size of members’ economies. These core functions include General Assembly meetings, peacekeeping and human-rights monitoring. In a letter seen by The Economist that Mr Guterres sent to members in February, he warned that the peacekeeping budget to pay for troops may run dry by mid-year.
The “root problem”, according to the UN boss, is that some members are paying their bills late and others not at all. The UN collects mandatory dues in the year that it intends to spend them. For that reason, members are meant to send their fees in January so that the UN can pay its staff and suppliers. But countries are paying their required fees later and later. In 2024 about 15% of the UN’s budget funds arrived in December. Then there are the free-riders. Members failed to pay $760m in mandatory contributions. The unpaid millions were owed by 41 countries, including America, Argentina, Mexico and Venezuela. Some may have paid after the year ended.
This year just 49 countries paid on time, forcing the UN to trim outlays and defer payments. The savings range from the quotidian (air conditioners will be set at 26°C in Geneva this summer) to the grave, such as slowed investigations into atrocities in Sudan and Ukraine. Targeted spending cuts to inefficient programmes or an overall reduction in the budget require a consensus vote among members, but poor countries are loth to cut an organisation they benefit from and which is paid for chiefly by rich ones.
The UN cannot borrow. As well as cutting costs, it manages its erratic revenues by dipping into reserves and plundering leftover cash. That is no longer sustainable. Unpaid dues from 2024 are 60% higher than the amount the UN can easily absorb, exhausting its cash buffer.
America and China each contribute about 20% of the UN’s annual budget and both have become unreliable. America’s payments have been habitually late since the 1980s, says Eugene Chen of the Centre on International Co-operation at New York University. During the first Trump administration tardiness was compounded by America not paying in full. China has also begun paying late. Last year its money arrived on December 27th, four days before the end of the financial year. Only North Korea paid later.
Delayed payments do not just make it harder to balance the books. China’s contribution arrived so late it was impossible for the UN to spend it all before the accounts were closed. Instead of keeping cash to refill depleted reserves, UN rules require it to rebate unspent money to members to offset future fees. Even those who did not pay their dues got a credit. So late payers not only force the UN to underspend in the current year, but also rob the organisation of future funds.
In 2026 the UN will have to refund $300m that arrived late in 2024, which will be triple this year’s rebate. The UN’s finance chief, Chandramouli Ramanathan, expects that in 2027 such rebates will jump to $600m, or 17% of the budget.
Though America can blame its late payments on a convoluted if transparent congressional process, China’s dilatory behaviour is puzzling. America has previously withheld funds until the UN agreed to certain of its demands, such as creating a budget audit office in the 1990s. What China hopes to gain from late payment, says Mr Chen, is less clear. Like all UN members, China wants more influence in the organisation and more key policymaking posts for its nationals. “This informal leverage may be a way of reminding the secretariat that China is a major financial contributor and cannot be ignored.”
Might Uncle Sam refuse to cough up?
At least China does pay, even if belatedly. Few are sure that America will settle its $2.3bn annual bill. President Donald Trump has wielded an axe to parts of the international system. After taking office he froze funding for international bodies and has sought to abolish America’s aid agency, USAID. He also ordered officials to review America’s participation in all international organisations, including the UN. The results of the review are due in the middle of July. Speculation is rife among UN diplomats over whether Mr Trump will choose savage cuts or, as some recent reports suggest, refuse to pay at all. Mr Ramanathan says the latter scenario would leave his budget in deep trouble.
Article 19 of the UN charter says that a country that skips two years’ worth of payments will lose its vote in the General Assembly (but not its veto on the Security Council, if it has one). America’s total arrears are about $3bn, still shy of its $4.5bn two-year limit. If Mr Trump does not pony up, America will fall foul of the rules in next year’s budget and have its vote stripped in 2027. Today, officials are digging up precedents from more than 60 years ago, when France and the Soviet Union refused to pay for certain peacekeeping missions and fell behind on payments. Back then, few wanted to test the rule, so the General Assembly stopped voting altogether for fear of the consequences. ■