No Pay, Still Paid: The UN's Absurd Budget Rule

UN’s Financial Paradox: Refunding Countries That Don’t Pay

By Ahmed Fathi

UNHQ, New York: The United Nations is facing a financial paradox that undercuts its credibility and capacity: it is refunding unspent funds to countries that never contributed them in the first place.

Current regulations require the UN to return unspent portions of its annual budget to all member states, in proportion to their assessed contributions—whether or not they actually paid. This means that when funds go unspent due to cash shortages, refunds are still processed to countries in arrears, effectively rewarding non-payment while punishing those who fulfill their obligations.

This isn't a one-off anomaly. It’s a structural flaw, rooted in financial rules drafted under the assumption that every member state would always pay in full and on time. That assumption no longer holds true. Yet the regulations remain intact.

Adding to the dysfunction is the UN’s rigid budget architecture, commonly referred to as the “bucket system.” Regular budget funds, peacekeeping resources, and voluntary contributions are all kept in separate financial silos. Money allocated for one purpose cannot be reallocated to another, even in a crisis. A department with unspent funds cannot share them with another in need. As a result, missions are forced to reduce services or shut down, not because funding isn’t available globally, but because it’s locked in the wrong place.

The implications are stark. Staffing reductions are already underway across the system, with departments proposing workforce and operational budget cuts. Programs are being delayed or canceled. Some missions lack funds for essentials like fuel or staff travel. Others are unable to keep offices running full-time.

The UN’s inability to borrow externally, coupled with an insufficient liquidity reserve, has made even routine cash flow problems feel like existential threats. Funds often arrive late in the year, making it impossible to spend them before the deadline. Ironically, the UN is then required to return these unspent funds—including to delinquent states.

This cycle of delayed funding, constrained spending, and forced refunds reduces the budget base for future years and leaves the UN trapped in a loop of artificial austerity. And while peacekeeping operations are at least allowed to offset refunds against unpaid contributions, the regular budget offers no such flexibility.

Efforts to reform the rules have stalled for decades. A growing number of member states support change, including proposals to allow refunds only when funds are actually received, and only to those who have paid. Yet resistance from a small bloc of holdouts continues to prevent consensus.

The solutions are neither radical nor complex: enable internal borrowing, expand liquidity reserves, allow inter-bucket transfers, and decouple refund obligations from unpaid contributions. These changes would introduce basic financial sense into a system that now defies it.

As global crises intensify—from armed conflict to humanitarian disaster—the UN is being forced to do more with less, under rules that make less possible. If these structural flaws aren’t corrected, the organization will continue to erode—not from political irrelevance, but from financial self-sabotage.