Front Burner - Why the UN is going broke

Episode Date: October 16, 2019

The United Nations is facing a severe shortage of cash, according to Secretary-General António Guterres. The cash flow problem is so dire that the UN is begging member states to pay their dues and have started austerity measures. Today on Front Burner, CBC’s UN reporter Melissa Kent explains why the UN is going broke and what the United States has to do with it.

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hello, I'm Jamie Poisson. So, I suppose that this is a bit awkward for them. But the United Nations says that it's going broke. The United Nations is adopting a series of money-saving measures.

Such as adjusting the thermostat, shutting down some escalators, cutting hiring, curtailing travel. Warning that it could run out of money within weeks. So broke that the Secretary General of the UN is begging member states to pay their dues. These months, we will reach the deepest deficit of the decade. We risk exhausting the closed peacekeeping cash reserves and entering November without enough cash to cover payrolls. So what is going on with the UN?

And how did it get this bad? My colleague Melissa Kent covers the United Nations, and she's joining me today from New York to explain why the UN is in a financial crisis and what the United States has to do with it. This is From Berne. Hi, Melissa. Hi. Thanks so much for being here today. You're very welcome. So please explain this to me. Exactly how broke is the United Nations? Well, the UN is currently operating

with a budget deficit of about $1.4 billion for this year. So what does that mean? Well, the UN says it's so bad that it may not be able to pay staff next month unless the countries which have still not paid their dues for 2019 pay up. Because this is a cash crisis. It's all about liquidity. It's not actually a budget crisis. The equation is simple. Without cash, the budget cannot be properly implemented. In the current biennium, budget implementation is no longer being driven by program planning, but by the availability of cash at hand. The budget is approved by consensus, that's by all 193 member states every two years. The problem is that more and more countries are paying their dues late, which means the UN doesn't have enough money to cover its operating costs.

And right now there are seven countries that make up 97% of that outstanding bill, the United States, Brazil, Argentina, Mexico, Iran, Israel and Venezuela. Catherine Pollard, who you know is the Undersecretary General for Management Strategy, United States, Brazil, Argentina, Mexico, Iran, Israel, and Venezuela. Catherine Pollard, who you know is the Undersecretary General for Management Strategy, Policy and Compliance. We've always known that different member states pay at different times during the year. However, in recent years, there's a growing downward trend whereby every single year, the situation seems to become more difficult than the year before. The cash deficits occur earlier in the year, linger longer and run deeper.

Okay, okay. So I just want to make sure I understand what you're saying. Is the idea here that all of these countries have already agreed on a budget for the United Nations and the United Nations has sort of allocated that budget and now these countries are saying, I don't think we're going to pay? It's not clear if they're saying they're not going to pay. Some are going through financial difficulties, so they're having trouble paying. Others are paying late. So that's a trend that we're seeing more and more at the United Nations.

So what the UN has been doing in recent years is taking money from reserve funds, including closed peacekeeping reserve funds, to try to cover the costs because the UN can't actually borrow money from a bank like a regular organization to cover its expenses. So between now and December, it has about $955 million in operating costs to cover. That's per the approved budget, as we've established.

About half of that is staff salaries. So it comes to about $150 million a month for the next three months. How much does the UN have right now? $147 million, enough to cover one month worth of salaries, nothing else. And that month is October. Wow. Wow. So speaking of all these staff members who might not get paid past October, I understand a letter was recently sent out to them and to all the member countries, and you got a copy of that letter. And like, what did it say?

It was from the Secretary General of the United Nations, Antonio Guterres, and it had a very ominous title. It started Financial Situation of the Organization. Oh, that is an email I would not like to receive. Exactly. At CBC or anywhere else. Yeah, exactly. So it basically goes on to say that because of the current liquidity crisis, the worst in a decade, the UN is going to try to save cash by instituting a series of cost-saving measures. So they include curtailing official travel, not all of it, non-essential travel, leaving empty posts unfilled, limiting interpretation

hours and security over time, taking longer to translate documents into the UN's six official languages, shutting down certain escalators and adjusting the thermostat. Really? Has the thermostat and the escalators actually been shut down? Yeah, absolutely. There are escalators that have been turned off. There are still elevators that can take you to those floors. And as far as the thermostat, I think that we might be more used to the cold as Canadians. But here at the UN, we have a lot of people from all over the world, and some of them are very hot, tropical countries. I went to visit a colleague down the hall earlier, just for example, and she was wearing a shawl and complaining that she was freezing. She even joked that she's going through menopause and having hot flashes and that she's still cold, and she insisted that I feel her hands. And so how are other people responding to these austerity measures? Like, you're there, right? What are people saying?

austerity measures? Like, you're there, right? What are people saying? Well, I think one of the austerity measures which is having the most immediate impact is the UN Delegates Lounge, which is the bar here at UN headquarters. And it's been featured in films, such as The Interpreter with Nicole Kidman. I think they were talking about assassinating President Sewanee here at the UN. In that letter from the Secretary General to all the missions and the staff that the CBC obtained, he says that starting this week, the lounge will no longer be open past 5pm.

So it's usually open to 8pm, Monday through Thursday, and 10pm on Fridays. But, of course, that would involve overtime for security officers at the gates outside, inside, cleaning staff, electricity bills. So I can tell you that last Friday it was jam-packed with people

basically taking advantage of the last Friday that it would be open late for the foreseeable future. So they're basically just going to make it so people can drink during the day instead of at night? Yes, that's exactly the aim, I think. Look, I can't help but think that some of these measures seem like small potatoes, right? Like you were just talking about how salaries alone cost $150 million per month and that the UN only has $140 million left.

And so how are shutting down escalators and like limiting the hours of this bar going to solve the problem? I don't think they're going to solve the problem. I think the UN is just desperate on two fronts. One, it wants to get the message out that this is happening. And two, And maybe it's more entertaining for us to talk about escalators and bars. Like maybe that's a way for them to get these headlines. They can't really do anything. They're just limited because they depend on contributions from member states. So the UN wants people to know what's happening, staff and the world at large. And to give listeners an idea, yes, some of this is small fry, but it's really all they have. They've turned off the water fountain in front of the UN headquarters here,

for example. I'm not sure how much money that saves, but it's saving money. They've lowered the thermostat by one degree Celsius, two hours a day. And just that, to give listeners an idea, just that saves the UN here in New York $7,100 a day. Wow, that's actually more than I thought it was going to be. But look, like when people think of the UN, I think they probably think of peacekeepers and UNICEF and humanitarian aid. Has this cash flow affected like regular United Nations operations? Well, that's a very, very good question, but we're going to have to wait and see because it's still too soon to say.

If dues are not paid on time, if the countries don't pay their dues on time, then we probably, we will start seeing operational disruptions. For example, if it can no longer pay for charter flights at its political missions in Afghanistan, Somalia and Iraq, well, there will be a problem. Ditto if it can't pay staff. I should actually mention at this point that we've been talking about the regular UN budget this whole

time. Peacekeeping is a totally separate budget, which also has its own shortfalls at the moment, but not as grave as the UN's regular operating budget. Okay. And you mentioned all these countries that make up the outstanding bill, the United States, Brazil, Argentina, Mexico, Iran, Israel, and Venezuela. Like, are they saying that they're going to pay? Are they planning to pay up here? So the UN has been in touch with all countries that are in arrears. I spoke with the controller today who said that they're getting positive feedback and those who can pay will pay. But some countries, such as Israel, have already indicated they won't pay certain parts of their bill.

They're all trying. Everybody's saying they're trying. Nobody has told us they will not pay, except to the extent where they publicly said that. I imagine Venezuela might not be in a position to pay right now either, considering they've got a humanitarian crisis at home. I do know that this isn't the first time that the UN has had issues paying the bills. And why does this keep on happening?

Okay, well, there are several reasons. For example, the UN membership approves the budget. We've established that. But then there's a built-in shortfall when it comes to assessing the dues. Some countries, as you mentioned, can't pay. And every year, there are always what's known as add-ons. So unforeseeables which come up during the year, such as Yemen, and that raises the bill.

There are many years in which the add-ons can be almost close to $100 million. And the budgetary methodology itself results in a situation where in a given year, the amount of money that we are supposed to spend relative to the assessment is more than the entire working capital. And then there's the Byzantine methodology used to assess the gross national incomes. It's outdated. But trying to change that would be a massive undertaking. For example, China is one of the biggest, if not the biggest, recipient of credits known as low per capita income adjustments, despite being one of the largest, if not the biggest, recipient of credits, known as low per capita income adjustments,

despite being one of the largest economies in the world. And where does Canada fit into all of this? Are we paying our bill? Oh, Canada's a keener. Canada paid in the top ten, number five actually, in January, on the UN's so-called honour rule. You can go online and look at it. It paid its contribution, assessed contribution, it paid $76,230,000 on CBC Gem. Brought to you in part by National Angel Capital Organization,

empowering Canada's entrepreneurs through angel investment and industry connections. Okay, so we're doing okay. But, you know, of course, we've mentioned a few times already the worst offenders, the countries that are making up like the largest chunk of the arrears. And who is like the worst offender in that list? I think I could probably guess.

Well, by far, the country that owes the most is the United States. More than $1 billion to the regular UN budget and current and overdue payments from 2018, and more than $2 billion to the peacekeeping budget. I should say that the U.S. usually pays its dues to the regular budget late every year, between October and November, and that's a habit which started during the Ronald Reagan years.

And the U.S. pays by far the most of both budgets, 22% of the regular budget and 28% of the peacekeeping budget. Okay, and is it just going to pay its dues late this year to both the regular budget and the peacekeeping budget? Because we're not in November yet. No, so it may pay, we're expecting it probably will pay its dues to the regular budget and the peacekeeping budget? Because we're not in November yet. No, so it may pay. We're expecting it probably will pay its dues to the regular budget this year, probably October, November. And I did speak to an official at the U.S. Mission who said that, and I'm quoting, that the vast majority of what we owe to the regular budget this year,

we will pay as we have in past years. But when it comes to the peacekeeping budget, and I continue to quote, the United States has been very clear on its position that no one member state should pay more than one quarter of the organization's budget. This is something that we firmly believe, and the lack of agreement on a 25% ceiling will unfortunately cause the organization to continue to face a 3% shortfall. So in a nutshell, the US is responsible for 28% of the peacekeeping budget, but has said it will only pay 25%. Okay, so basically what the United States is saying is that they're going to pay the vast majority of what they owe to the regular budget, but 3% less than what they owe

to the peacekeeping budget. Exactly. Okay, and the idea here is that they are going to pay this money, but because the UN is in such dire straits when it comes to cash flow, they're saying that they don't even think that they can wait until November. Exactly. Which has led to these austerity measures. Okay. And maybe they can sort of create stopgap measures by shutting down escalators and closing down the bar. Right. Okay. got it. You know, I do understand that there have been longstanding issues between the U.S. and the U.N. And so why does the U.N. depend so heavily on the U.S. for financing? Because, I mean, we're talking a billion dollars to the regular budget, two billion to the peacekeeping budget. And that's actually only the money that's in

arrears. The U.S. has actually already paid $600 million this year. But it's always been that way. I think at one point, the U.S. paid something like 40% of the U.N. budget back in the 40s and 50s. But these contributions are based on formulas which are agreed upon by all member states, including the U.S. So these issues between Washington and the U.N. are congressional in nature. It's the U.S. government which said it won't pay more. And Donald Trump has also repeatedly said that the U.S. is shouldering too much of the financial burden at the U.N. right from the get-go in his maiden speech to world leaders in 2017. The United States is one out of 193 countries in the United Nations. And yet we pay 22% of the entire budget and more. In fact, we pay far more than anybody realizes. But I should point out that the UN says

that peacekeeping operations cost or make up less than 1% of global military expenditures. So cost benefit wise, they are quite reasonable. Okay, so if the U.S. doesn't want to pay anymore, why don't they just negotiate less instead of, you know, promising to pay this and then putting the United Nations in this position where they're having a cash flow problem? Like, I understand this is something that they've done in the past, right? They have. You're very right. And actually, there's an interesting historical element to that story because it was Joe Biden, then senator for Delaware, who two decades ago brokered a deal with the ultra conservative Republican Jesse Helms.

It became known as the Helms-Biden Act. And basically what it did is it allowed or provided the framework for the U.S. to negotiate a reduction in the U.S. contribution to the regular budget and the peacekeeping budget. Senator Helms is going to give an important address. It's our solemn duty to see that it is wisely invested so as the representatives of the U.N.'s largest investors, the American people, we have not only a right but a responsibility to insist on specific reforms in exchange for their investment. But this was a massive undertaking because you have to remember that the budget is a zero-sum game. If one country pays less, another is going to pay more. So the final agreement that took months and months, it required creative solutions, including a contribution of $31 million from American entrepreneur Ted Turner.

Ah, really? Yeah, because he, the U.S. was looking for a way to smooth the transition for other countries who are now going to be expected to pay more. Okay, and no indication that there are any of those creative solutions on the table now? that there are any of those creative solutions on the table now? No. There has been, the U.S. has said that it won't pay it, but as far as we've been told, there haven't been any negotiations going on behind the scenes.

You know, you mentioned before that Donald Trump has been critical of the United Nations. He says that it's shouldering too much. And so how is the relationship between the U.N. and the U.S. changed since Trump took power? I don't think that there's any doubt that the relationship has become very strained since he took his oath of office. The U.N. is all about multilateralism and consensus, a notion that Trump is antagonistic toward. Just last month in his speech to world leaders here at the UN General Assembly, he said that the future does not belong to globalists. The future belongs to patriots.

The future belongs to sovereign and independent nations who protect their citizens, respect their neighbours, and honour the differences that make each country special and unique. I mean, some of this rhetoric that he's saying, these are not kind of new criticisms that I've heard of the United Nations. And you mentioned before that this is sort of like a zero-sum game. If the United States pays less, then, you know, other countries have to pay more. But I wonder, does it have to be that way? You know, could the UN look at cutting its costs even more? I've just,

I've read quite a bit about how this organization has become incredibly bloated and bureaucratic. Is it also possible that the United Nations could rethink how it does its work? Definitely. It is a bureaucratic behemoth. I mean, even for us journalists, just to get a riser so that we can have our cameras behind the reporters, it takes three different departments all talking to each other. But I should say that António Guterres has made reform of the UN his main priority since taking office. And he's instituted many changes. He says he doesn't want the different departments to work in silos. They need to work together. He's trying to stop the doubling up. But even that, of course, takes time

because the UN is enormous. It's all around the world. And there are so many agencies associated with it, UNICEF, World Food Program, so many departments, thousands and thousands of employees all around the world. It's a huge undertaking. All right. So in the meantime, I guess we just have to wait until November to see if people get paid. That's right, which makes me very happy that I work at the United Nations and not for the United Nations, because I know that'll be paid next month. Melissa, thank you so much.

You're very welcome. On Friday, we did this episode with our Moscow correspondent, Chris Brown. It's in our feed if you're interested in listening to it. He'd recently been in Syria, and he explained how the U.S.'s abrupt decision to pull its troops out of the northeastern part of the country not only abandoned their Kurdish allies in the region, triggering a Kurdish invasion, but also allowed this power vacuum that Russia could then step into. Well, yesterday the New York Times reported that is exactly what's happening. According to the Times, the Russian military is patrolling the territory the U.S. left behind.

Canada, for its part, has condemned Turkey's invasion and suspended new export permits to the country. That's all for today. I'm Jamie Poisson. Thanks so much for listening to FrontBurner and see you all tomorrow.