Reforming the UN during a financial crisis: a foreseeable failure to align money, mandates, and majorities?

Abstract

The United Nations (UN) system is in its deepest financial crisis in decades. At the same time, a number of reform processes are being prepared or implemented, most notably the UN80 reforms that combine organizational and institutional reforms, mandate review, and cutback management. This Briefing argues that UN reform is already difficult in normal times because money, mandates, and majorities are not converging. Organizing the UN80 reform process during the financial crisis capitalizes on reform pressures but overburdens the decision-making system. In the short term, a well-organized cutback management should thus prevail with the goal to stabilize core structures across the entire UN system. In the mid-term, true UN reform would require the reorganization of UN system-wide multilateral financial decision making.

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Introduction

It is the summer of 2025. The United Nations (UN) system is in its largest financial crisis in decades. The tendency is that 2026 will only be worse. In parallel to this crisis that reaches from the UN’s core to many of its larger and smaller agencies, fundamental UN reform discussions are ongoing under the headline “UN80”. While referencing the 80^th birthday of the UN Charter in June 2025, there is no celebratory mood.

This Briefing addresses the question why and how the ongoing and looming financial crisis and the substantive reform discussions are linked, and how they negatively impact each other. This builds on key pieces of research related to UN reform (failures) and UN financing published in the last decade as well as an extensive series of posts I have written on the ongoing reform process and UN financial crisis.

The core argument for this Briefing is that UN reforms fail because multilateral funding (‘money’), global goals and structures (‘mandates’), and state preferences and voting coalitions for substantive reform options (‘majorities’) are generally not aligned and suffer from fragmenting dynamics. During a financial crisis, this misalignment is further exacerbated because money is scarce, mandates are in peril, and majorities are hard to find. Successive reforms, since 2017 in particular, have also created “reform fatigue” among an anxious staff, many of whom are now about to lose their job.

In the following, I therefore want to present the state of the UN’s financial crisis and the UN80 reform efforts, discuss key academic findings on international organization financing and reform, and outline two paths going forward: one immediate survival path for adapting the UN system to the current cash shortfall, and one more mid- to long-term reform path to change UN system-wide budgeting and resource mobilization.

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The scale of the UN’s financial crisis

The opening presentations that the UN’s budget chief (‘Controller’), Chandramouli Ramanathan, and the UN Secretary-General’s leading official for the UN80 reform process, Under-Secretary-General Guy Ryder (former Director-General of ILO), gave on 24 June 2025 to UN member states in New York reminded everyone of the scale of the crisis: They expect the UN system to contract by 30 per cent in 2025 compared to the peak year 2023 when total expenditures had reached USD 68.5 billion. 2025 funding levels could return where they were in 2016. Considering inflation and cost increases over these past ten years, this would be well below real 2016 level. This is mostly due to multilateral aid cuts from the USA but also many other Global North donors who all reduce their voluntary support to the UN system, especially in humanitarian and development affairs.

In a virtual town hall meeting in June, UN Controller Ramanathan explained to UN staff that at least USD 600 million in savings needed to be found in 2025 within the adopted UN regular budget of USD 3.72 billion (a budget implementation rate of 83 per cent). The reason is a massive liquidity crisis resulting from the USA’s non-payment and from Chinese late payment of assessed contributions.

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Current UN financial rules mean that liquidity is expected to get worse and worse going into 2026 and 2027, unless member states come to an agreement by the end of 2025 to change current financial rules and pay in time. Member states failed to do so by the summer break, and the UN Controller directed quite harsh words at them after this failure, saying “no money, no implementation.”

At present, most of the savings to maintain cash flow in the UN Secretariat are achieved by leaving many vacancies open, by cutting travel and consultant contracts, or by closing UN buildings. Without sufficient cash, the UN may not be able to pay salaries in full during 2026. In the UN humanitarian sector, the situation is already catastrophic because the USA and other Western donors are massively cutting their voluntary contributions to the UN system. The “magnitude, gravity, and suddenness of humanitarian aid cuts” force agencies like WFP to do “less with less”, moving to a “hyper-prioritization” for life-saving activities (Carl Skau, WFP Chief Operating Officer). Donor governments have asked the UN humanitarian aid coordinator to achieve savings and better coordination. And, in the humanitarian domain, this is not (just) about unpaid UN salaries. This is about 114.4 million people with life-threatening needs in 2025.

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UN reform: necessary but impossible?

Talking about UN reform in this context seems both necessary and impossible: Necessary because cutting back the UN system without reform(s) means spreading its resources too thin for real impact. Impossible because managing a financial crisis and achieving 20-30 percent cutbacks for organizational survival already requires a lot of time and effort for UN leadership and staff that they cannot invest in reconciling divergent reform ideas.

Even outside a financial crisis, few contest the need to consolidate the overly fragmented UN system. Anybody who looks at the official UN system chart notices that “the” United Nations are many United Nations. And the chart underrepresents the complexity and fragmentation of the system: The UN System Chief Executive Board for Coordination brings together 31 administrative leaders of different UN agencies, excluding quite a few of the 43 UN entities for which there is detailed financial reporting.

There is also quite some overlap in mandates and focus of agencies (which is not a novel realization). Multiple UN agencies deal with health-related topics — WHO, UNAIDS, UNICEF, etc. The regulation of artificial intelligence is spread across multiple entities (UNESCO, ITU etc.). And humanitarian assistance and development aid are in the hands of multiple large UN departments and agencies — OCHA, UNHCR, WFP, UNDP, UNICEF — that administer more money than the regular UN budget and the UN peacekeeping budget(s) combined. On top of inter-organizational fragmentation, there is also fragmentation and differentiation within UN agencies, from semi-autonomous regional offices in the World Health Organization to micro-level fragmentation at the field level in thousands of projects. The UN system is a fragmented system with fragmented budgets and sources of funding.

Research has shown that UN intra-organizational fragmentation is often the result of decades-long path dependent processes. It is sustained by status quo-oriented budgeting processes where states prefer micro-management and segmented finances over strategic reorientation of UN agencies’ work. And because states are unhappy about the outcome of status-quo oriented regular budget processes, they started to provide more and more earmarked voluntary contributions to the UN system. This added to intra-organizational fragmentation (“projectitis”) but, more importantly, led to the creation of entirely new UN entities. Earmarked funding ultimately undermines multilateralism by eroding collective mandate-making and replacing it with minilateral project-financing.

This would imply that the ongoing UN80 reform initiative is meant to fail because it does not address the underlying dynamics that drive fragmentation. There is no reform coalition that controls both, money and majorities across the entire system and also not in the Fifth Committee of the UN General Assembly where the UN budget is decided. Instead, when a leaked UN80 document with ideas for merging UN departments and agencies emerged, this generated waves of counter-reactions. Discussions in the UN General Assembly on the UN80 initiative indicate that few member states are willing to really invest in cutting down on mandates, despite the severe financial cuts done by a small number of them that have directly affected those UN agencies most dependent on voluntary funding.

Finally, while UN reform is already difficult in normal times, we also know from the US’ refusal to pay for UNESCO’s budget after 2011 that structural reforms during financial crisis in UN agencies are likely to fail because of a lack of synchronization between reform efforts by UN bureaucracies and by UN member states. While the UN Secretary General pushed ahead, the majority of states and UN staff are very hesitant. Achieving the UN80 goals in the midst of a financial crisis thus seems almost impossible.

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The UN80 initiative: Reform process or liquidity crisis management tool?

The UN80 initiative comes on top of various ongoing or unfinished reform processes. Most of these reform efforts do not touch on all three aspects of a major reform: money, mandates, and majorities. Techno-optimistic modernization efforts like the “UN 2.0“ (ongoing) do not require policy mandate reforms. The already adopted UN “Pact for the Future” (2024) for policy and institutional reforms excluded financial and budgetary aspects. And the somewhat successful reform processes for a streamlined UN Resident Coordinator System (2018) mostly concerned donor-funded activities that do not require multilateral majorities. In other words, many reform efforts in recent years did not go at the root of the UN system problems, and so is the UN80 reform initiative likely to be, even if it is more massive in scope than most of its predecessors.

Given the backdrop of the UN financial crisis, UN80 is trying to combine two things into one single process (without openly admitting it): On the surface, this is directed at a mid-term organizational and institutional reform of the entire UN system. At the same time, it includes short-term cutback management efforts linked to the wider reform efforts. Among UN member states and staff, this has already led to confusion because the short- and long-term goals of this reform process are not clear to some, while they are contested by others. Those who are critical of reform efforts fear that cuts made for liquidity reasons become long-term cuts that they do not want.

Especially for Global South countries, the term “reform” is often associated with cuts that affect those UN operations that are dear to the Group of 77 (G77), representing the Global South in the UN General Assembly. And while UN leadership claims in public meetings that the UN80 initiative and the financial crisis are not directly linked, the reality is that the three pillars of the initiative are clearly relevant for cutback and for reform efforts, just at different time horizons:

Pillar 1: Organizational reform inside the UN Secretariat. The first pillar of the reform is the most obvious cutback exercise. From cutting staff positions by 20% to office relocation to cheaper duty stations, from closing buildings to looking at staff compensation packages, a lot of options are on the table. Some of these measures allow for short-term savings, but most provide a roadmap for mid-term scaling down of the UN Secretariat, cutting corners, or rethinking internal business models. The (possible false) hope is that a more streamlined UN might win back the US. Especially the proposals to reduce staff costs by 20% across all UN Secretariat departments, a request that the Secretary-General made in spring for a revised draft 2026 budget, indicate that Guterres needs options to run a shadow budget in 2026 in the likely case no US funding comes in.

Pillar 2: Intergovernmental mandate review. This pillar pushes member states to agree among themselves that not all present-day mandates can be done with significantly less funding. However, there are significant doubts that this process can be successful in light of past attempts. Experience with the last mandate review process was that member states did not come up with tangible results.

Pillar 3: Systemic reform. This addresses the entire structural setup of UN system and includes suggestions to merge UN agencies with overlapping mandates and to combine administrative and operational functions across agencies, potentially at cheaper locations. Some aspects are similar to what was called the Global Service Delivery Model a few years ago, an approach then criticized by UN staff unions for potentially costing more than it would save. These proposals are much more long-term given the massive operational and organizational changes they require. It is unclear, for example, if related normative and operational functions are best split between multiple entities (like WFP and FAO, UNFPA and UN Women or UNHCR and IOM, examples that are frequently mentioned) or ifit is better to consolidate those functions within single agencies. However, given the lack of funding, there is quite some short term-pressure on agencies to better coordinate, and thus minimize duplication and turf wars to ensure that a maximum of humanitarian and development aid reaches a maximum of recipients. Different ‘clusters’ with department and agency heads will meet regularly during 2025 to discuss both the short- and long-term options.

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The way forward: from short-term survival to long-term reform

There is no doubt that the UN financial crisis needs an immediate response. There is also no doubt that UN system fragmentation and the multiplication and overlap of mandates could be addressed by major reform efforts. However, the UN Secretary-General has chosen an approach for UN80 that does not seem to work in the current financial crisis. This Briefing proposes disentangling the short-term and long-term efforts in a 2-step process.

Step 1: Ensuring short-term survival and stabilization of core structures

Instead of mixing cutback management and structural and mandate reform, the UN Secretary General, together with the heads of major UN agencies, should collaborate to bring the UN system on an immediate survival path. This requires the recognition of a sufficiently large majority of member states that money is so scarce that mandate delivery is not possible at the levels agreed or at levels seen in previous years. The focus should be on stabilizing core UN structures with core funding, starting from the UN Secretariat and the main Specialized Agencies to other main UN entities. This implies that all member states admit that some of their favorite UN activities need to be cut. However, different to the UN80 logic, they would not agree to cut them forever. They are put on hold until liquidity and voluntary funding returns, even if it is clear that this may take some years. However, to get G77 or other groups’ buy-in, such agreement on ‘intermediate’ measures might be necessary. Agreeing with large majorities on strengthening core structure also helps direct assessed and core voluntary funding so that fundamental mandates are maintained — and the mandate review (pillar 2 of the UN80 initiative) could focus on defining what is ‘fundamental’ by a prioritization exercise at global, regional or policy-level (similar to UNESCO’s prioritization attempts in 2012-13). If funding is spread too thin, multilateral structures that have been built over decades may be destroyed. To achieve operational stabilization, major donors could agree in consultation with Global South countries where to focus humanitarian and development aid, how to shift earmarked to core funding, and how to ensure that necessary cuts leave the least harm possible for the UN system and populations in need.

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Step 2: A new UN system-wide budgetary coordination process

In the mid- to long-term, it is clear that a reform of the entire UN system, at the scale envisaged by the UN80 initiative, cannot be done without reforming the underlying decision-making processes that link multilateral majorities with the allocation of core and non-core resources. At present, budgeting and resource mobilization take place in a fragmented UN system with many agencies. Donors do not coordinate their contributions across the entire system. The goal should be to create a UN system-wide coordination process — coordinated through the CEB or by layering a thin new governance structure on top of the system — where national priorities, global mandates, and resource availabilities are discussed at system-level between governments, agencies, and other donors. Based on these priorities, agency-level budgets are adopted, and donors decide where to allocate resources within the UN system in order to maintain core structures and to support the diverse galaxy of mandates.

This procedure would be similar to the integrated budgeting in WHO, just at the scale of the UN system. The details of such a coordination system go beyond the present briefing. It is clear that there are many legal, political, and practical hurdles. But any reform effort within the present system simply reproduces the fragmentation and overlap that we see today. A centralized resource coordination process could allow for the dynamics of the UN80 process to unfold over the mid- to long term and go beyond the management of the present-day financial crisis.

As a political exercise, the goal of such system-wide coordination would not just be limited to allocating scarce resources. It would also be a signal by a majority of member states and donors that they do not want to see the multilateral system cut down to its bones. And it is clear from their behavior that the USA, China, Russia and a few others want to return to a global order without strong, knowledgeable, equitable, and peace-oriented multilateral institutions. The current UN financial crisis and the related reform process(es) are clear symptoms of this attack on multilateralism.

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