The UN is faced with a critical financial situation which leads to increasingly adverse effects on its reputation, as well as on the efficiency and effectiveness of its future operations. The situation, which has many intractable aspects of a political nature, is of long standing. In earlier years, the deficit, although steadily accumulating each year, was of manageable proportions. However, accommodations and compromises have increasingly had to be accepted in order that the UN can fulfil, in a meaningful manner, the basic purposes of its Charter. Although recourse to expediencies can be continued for a limited period, it is evident that cash and investment reserves (including balances temporarily available in trust and special accounts), have been virtually exhausted as a means of financing budgetary commitments.
The present financial difficulties of the Organization began at the end of 1956 when the General Assembly first levied assessments on Member States for contributions to the Special Account for the UN Emergency Force, to cover a part of the UNEF costs which were not covered by voluntary contributions. Prior to that time, all assessments by the General Assembly were in connection with expenses covered by the regular budget of the Organization and with the Working Capital Fund, and these assessments were paid in full by all the Members with but little delay. The undertaking of the UN Operation in the Congo in mid-1960, for which a substantial number of Members failed, or refused, to pay contributions assessed by the General Assembly, caused the financial difficulties to assume far more serious proportions from that time on, despite the various measures taken by the General Assembly, and the voluntary contributions made by some Member States, to alleviate the difficulties. The difficulties attributable to unpaid assessments were further increased, beginning in 1963, with the refusal of certain Member States to pay part of their regular budget assessments. This part, estimated at $4.8 million for 1963 and 1964 and $2.8 million for 1965, corresponded to their shares, under the approved scale of assessments, of the cost included in the regular budget for the payment of interest and the instalment payments due in respect of the principal amount of UN bonds, and also, in some cases, their shares of the costs of certain activities in the regular budget which they consider illegally included therein. In 1971, the UN encountered grave difficulty in meeting its payroll and other day-to-day obligations. At March 31, 1986, total arrears of payments to the UN by member states was $742.87 million, $176.85 of which were contributions outstanding for prior years.
In September 1991, the UN was owed more than $1 billion in unpaid dues and was heading for insolvency. Another $518 million was owed for peacekeeping operations. In August 1993, with a total cash reserves sufficient for less than two months of operations, the organization faced imminent financial crisis jeopardizing its peacekeeping operations in Yugoslavia, Cambodia, Somalia and elsewhere, with the implication that it might be unable to meet its salary commitments.