The United Nations General Assembly has overhauled a decades-old rule that has forced the world body to return cash it never actually collects to all member states in a practice that has worsened the organization’s current financial crisis.
The adoption of an Assembly resolution on June 30 to pause the archaic practice was the result of a series of negotiations in the organization’s budget committee and a concerted push by Secretary-General António Guterres to ease the UN’S financial regulations and allow breathing room as it navigates an unprecedented liquidity crunch. Experts have been warning that the crisis could have put the New York City headquarters’ lights out by the summer and the annual General Assembly world leaders’ week on hold. Those potential scenarios seem to be averted for now.
Annalena Baerbock, the General Assembly president, presided over the vote late Tuesday afternoon, calling the adoption a “landmark” decision.
The credit-return system dates to the 1960s, requiring the UN financial system to reimburse member states in the form of credits toward future obligatory dues for unspent funds, even when the cash was never actually paid. Guterres has said that the practice traps the organization in a “Kafkaesque” cycle of being required to give back money that does not exist.
“We’ve prevented a crash,” Chandramouli Ramanathan, the UN’s controller, told journalists at the UN in New York City on July 1. “We’ve ensured that the boat can get to the coast. It does not mean it’s strong enough now to keep sailing.”
Ramanathan said the UN has collected just 56 percent of this year’s regular budget assessments so far and has been suppressing spending to stretch its cash reserves as long as possible.
PassBlue reported exclusively on the various proposals to freeze the problematic credit system or to reform the entire financial architecture to try to pull the UN out of the deep red. Member states in the budget committee were still working past midnight on June 30, the day they approved the resolution, with earlier talks stretching across other late nights and weekends to find a quick solution to the crisis.
Four-year trial run
The new approach to the credit system will run on a four-year-trial basis. According to the resolution, unspent money stemming from a country’s nonpayment of dues will no longer be credited automatically. Instead, Ramanathan said, it will be recorded as a debt the UN owes to a member state, held in separate accounts and paid only when the delinquent dues that created the shortfall are collected.
The resolution will also help to rescue the strained UN peacekeeping budget, Ramanathan added. Combined with the $800 million cut from the peacekeeping budget last year amid UN reform steps — eliminating roughly 25 percent of deployed troops based in UN missions — the onerous credit system would have left some of the missions operating at 60 to 65 percent of their original budgets.
“Peacekeeping would have nearly collapsed,” he said.
A full review of the new proposal is scheduled to take place the year before the trial period ends, with the Assembly making a final decision on whether to continue the system during its 83rd session. (The Assembly starts its 81st session in early September.)
“This new credit methodology is expected to save the UN approximately $1.2 billion in cash over the next 12 months,” Daniel Forti of the International Crisis Group think tank told PassBlue. The resolution directs the secretary-general to sort the credits into three categories: the regular budget, the peacekeeping budget and the international tribunals. The credits would also be sorted into amounts that should be automatically returned to member states and those that are tied up because a country has not fully paid its assessed dues.
The resolution now stipulates that the Secretariat will return to member states credits only derived from “cancelled prior period commitments, higher than budgeted income and unspent balances backed by cash received for the fiscal year’s assessment.”
China currently owes $428 million in regular budget contributions for this year; Ramanathan said he expected the money to arrive in two payments, in September and by the year’s end. The US, which has been assessed $767 million for its regular budget dues this year, has paid only $160 million. When combined with previous years’ arrears, the US owes the UN roughly $2 billion as well as $1.8 billion obligatory dues for the peacekeeping budget.
Eugene Chen, an independent UN analyst, said the Assembly resolution does not solve the organization’s steep financial problems, which stem primarily from Washington withholding its annual mandatory dues as well as late payments from Beijing.
It is “not enough for the Secretary-General . . . to say that all member states need to pay in full and on time, Chen said in an email. “It requires both acknowledging the fact that the U.S. has embraced the practice of a la carte financing and finding a way to work around this that doesn’t paralyze the organization while not rewarding non-compliance with financial obligations.”
Damilola Banjo is an award-winning staff reporter for PassBlue who has covered a wide range of topics, from Africa-centered stories to gender equality to UN peacekeeping and US-UN relations. She also oversees all video production for PassBlue. She was a Dag Hammarskjold fellow in 2023 and a Pulitzer Center postgraduate fellow in 2021. She was part of the BBC Africa team that produced the Emmy-nominated documentary, “Sex for Grades.” In addition, she worked for WFAE, an NPR affiliate in Charlotte, N.C. Banjo has a master’s of science degree from the Columbia University Graduate School of Journalism and an undergraduate degree from the University of Ibadan in Nigeria.
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Great contribution Damilola. My point is a simple one, Sir Chandramouli has not prevented a crash but the UNGA has voted to stop a very stupid practice which does not make any sense: the UN was returning to countries cash it has never collected!!!! Moving ahead the UNSG is right to get all UN member states to pay their annual dues fully, correctly and on time, that should be a non-negotiable position for the UN! Delinquent member states should be penalised by suspensions or exclusions!
An excellent and timely article. Congratulations to the PassBlue team for shedding light on one of the most consequential yet least understood reforms in the United Nations’ financial governance.
This landmark decision is far more than an accounting adjustment—it is a practical reform that strengthens the Organization’s ability to fulfill its global mandate. Sound financial stewardship is the foundation of an effective United Nations. Without adequate liquidity, even the most essential peace, humanitarian, and development operations can be compromised.
The General Assembly’s action demonstrates that meaningful institutional reform is possible when Member States work together in the spirit of multilateralism. While this decision provides much-needed breathing room, it also reinforces the importance of Member States meeting their financial obligations in full and on time and continuing efforts to modernize the UN’s financial framework.
As a former international civil servant, I welcome this important step. It is encouraging to see pragmatic reforms that help ensure the United Nations remains resilient, credible, and capable of serving people around the world.
Well done, PassBlue, for bringing this important story to a wider global audience.