By James T. Areddy
The United Nations said it will avoid imminent financial collapse by changing a budget rule that had forced it to come up with hundreds of millions of dollars in recent years, primarily because of nonpayment by the U.S. or late payments from China.
For 75 years, the U.N. has been required to refund states any unspent money it received from members, a rule designed to limit bloat at the sprawling institution. An unintended consequence of the rule in recent years was that countries that were late in paying, or didn't pay at all, would get refunds.
The U.N. General Assembly on Tuesday agreed to limit refunds for four years to states that actually paid their obligations, meaning the change primarily affects the U.S. Washington owes the U.N. some $4 billion amid Trump administration displeasure with the U.N., while Beijing remains behind on obligations topping $400 million.
The organization has for now "avoided the imminent financial collapse," it said in a statement that tallied $900 million in savings for peacekeeping operations and $400 million for its general budget.
Headquartered in New York, the U.N. had warned it faced a financial collapse as soon as August. Its liquidity woes were the subject of recent reporting by The Wall Street Journal.
Secretary-General António Guterres, who says the U.N. is in a "race to bankruptcy," welcomed the rule adjustment. The U.N.'s longer-term future remains precarious as the U.S. withholds billions of dollars in obligations, and the organization said Tuesday the agreement doesn't resolve the "underlying problem" of nonpayment and late payment.
Under the old rule, the U.N. had to credit countries for unspent money using a formula based on how much a nation was obligated to contribute. Today, the U.S. is responsible for 22% of the U.N. budget while China owes around 20%.
So even when the U.S. contributed nothing to the U.N. budget, it would be credited with 22% of the U.N.'s unspent funds.
U.S. officials didn't immediately respond to a request for comment.
The refund rule had saddled the U.N. with mounting obligations: the U.S. was owed refunds on money it never paid while China paid so late some years its money couldn't be spent.
Write to James T. Areddy at James.Areddy@wsj.com