CORE #1: Is The United Nations Facing a Financial Crisis?

Beyond these internal rules, global economic conditions also play a decisive role in shaping the UN’s financial stability. Rising trade tensions and tariffs have dampened the global economy, with Gross Domestic Product (GDP) growth projected to grow by only 2.4% in 2025 (Ani, 2025). Major economies, including China and the European Union, are experiencing declining exports and slowing investment due to growing policy uncertainty. This widespread slowdown directly affects the UN, whose regular budget relies on assessed contributions, calculated from each member state’s share of the world Gross National Income (GNI), essentially a measure of economic capacity (United Nations, 2025). When global GDP stagnates or contracts, these GNI-based assessments decrease proportionally, leading to a reduction in the UN’s core revenue.

In practical terms, weaker trade and economic growth erode national tax revenues and strain domestic budgets, making governments less able or willing to fulfill their international funding obligations. Many countries facing shrinking export earnings and rising debt have responded by tightening fiscal spending (Ani, 2025), leading to smaller contributions to the UN and an increase in unpaid dues. This economic downturn, therefore, is not only a setback in development but also threatens the financial stability of the UN system itself. As assessed contributions fall short of rising operational demands, the organization enters a troubling feedback loop, where weakening national economies reduce the UN’s capacity to address the very crises that those economies are also confronting.

The Impact on Development and Trade Programs

The UN’s ongoing financial shortfall has led to cutbacks in its economic and development initiatives. Key agencies such as the UN Conference on Trade and Development (UNCTAD),the UNDP, and the Development Account projects, depend on a combination of assessed and voluntary contributions. As these funding streams decline, the UN has been forced to reduce operational expenditures and delay critical programmatic activities. In late 2024, facing an acute cash crisis, the UN implemented a hiring freeze and imposed sweeping austerity measures to remain financially stable (UN Geneva, 2025). These included restricting nonessential travel, postponing contracts, and scaling back support services. Even essential missions have been curtailed. For example, investigative bodies addressing war crimes in Sudan and Ukraine were forced to suspend or slow their fieldwork due to budgetary constraints (The Economist, 2025).

Development-focused technical assistance has also been affected.. Projects related to trade facilitation, infrastructure development, and market access reforms in low-income countries have been reduced or deferred. Additionally, the UN Economic and Social Commission for Asia and the Pacific (ESCAP), which typically helps countries improve connectivity and trade policy, suspended all travel, new initiatives, and even closed its offices for three months due to funding shortfalls (UN Geneva, 2025). This unprecedented pause meant no new workshops on trade reform, no advisory missions on customs modernization, and no seed funds for pilot projects during that time. In practice, this  leaves policymakers without guidance to implement trade agreements, customs officials without training on digital clearance systems, and even small entrepreneurs without support to enter export markets. Over time, the economy of the region will suffer. Streamlined customs and transport links directly lower costs and raise exports (UNCTAD, 2024), so halting these efforts will blunt growth and keep many countries from tapping global markets.

Humanitarian and development agencies are also rationing resources. UNICEF and WFP have reported that financial gaps have compelled them to cut aid delivery by 20–30% in several countries (Ekanem, 2025). WFP has already announced cuts of up to 30% of its workforce and potentially leaving 58 million people hungry (Farge, 2025). These reductions have direct implications. With fewer  resources for food programs,  support for agricultural development and supply chains is undermined.Rural producers lack access to markets and credit, and aid that once helped build roads or marketplaces has been scaled back (OECD, 2025). The UN’s liquidity crisis has even led to delayed payments for vendors and staff, prompting Secretary-General António Guterres to issue warnings about the consequences for  “vital programs” worldwide (Leibl, 2024).

Despite the launching of the UN80 Initiative, various UN agencies are still suffering from serious consequences from financial shortfalls. In the Democratic Republic of the Congo (DRC), Haiti, Sudan, and Afghanistan, the UNFPA has expressed concern over the deteriorating circumstances for women and girls. Critical services, such asproviding essential medications, sending out health teams, and maintaining safe spaces for survivors of sexual violence are being reduced due to financial shortages. Similar challenges are being faced in Mozambique, where there are around 750,000 refugees and displaced individuals in need of safety. The United Nations Refugee Agency (UNHCR) warns that it might have to halt essential services, such as support for survivors of gender-based violence, healthcare, and education due to only one-third of its funding request having been fulfilled. In addition, Human Immunodeficiency Virus (HIV)/Acquired Immunodeficiency Syndrome (AIDS) programs are also being severely impacted.

Lastly, according to the Joint United Nations Programme on HIV/AIDS (UNAIDS) Country Director Aziza Hamidova, 60% of HIV program funding in Tajikistan is in jeopardy. Vulnerable populations are at a higher risk of infection because community health centres have already closed, communication efforts have been reduced, and access to preventive services like pre-exposure prophylaxis (PrEP) testing and counselling has drastically decreased. As a result of these widespread shortfalls, UN Emergency Relief Coordinator and head of OCHA, Tom Fletcher, has announced staff cuts and a reorganization of country programs (UN News, 2025).

Operational Challenges and The UN’s Strained Credibility

The UN’s failure to deliver operationally in high-stakes crises, driven by budget shortfalls and Security Council deadlock, has weakened its diplomatic credibility. In Sudan, for instance, the UN’s inability to sustain peacekeeping during the 2023–2024 civil war meant regional actors such as Kenya and Ethiopia stepped in to fill the gap. This sidelining reinforced the perception that the UN can no longer act decisively in escalating crises, leaving space for neighbors to lead instead (International Crisis Group, 2024).

In Gaza, paralyzing vetoes in the Security Council blocked unified political action, yet such crises are usually offset by humanitarian relief. However, severe cash shortages have drastically reduced the UN’s operational capacity. UN Office for the Coordination of Humanitarian Affairs (OCHA) has slashed 20% of its global staff and announced its deepest funding cuts ever, cutting its appeal from $44 billion to $29 billion (Lederer, 2025). Meanwhile, UN Relief and Works Agency for Palestine Refugees in the Near East (UNRWA), which serves millions in Gaza, has endured donor suspensions that further weaken its response. This convergence of political paralysis and budget strain prompted Qatar and Jordan to label the UN response as “morally bankrupt” (Stancati, 2024).

A similar pattern appeared in Ukraine as Russian vetoes stalled Security Council action and funding cuts weakened t rights and aid organizations. The UNHCR briefing note indicates that the agency’s funding requirements for 2025 were $10.6 billion, but by mid-year, only about 23% of this target had been met. This shortfall has led to significant reductions in services, with health and education services operating at minimal levels in many countries and a 60% reduction in relief supplies for refugees (UN Geneva, 2025). With operational resources shrinking, UN efforts are seen as insufficient and driving regional actors toward alternative security and aid mechanisms.

This erosion of institutional effectiveness has triggered a shift in where countries choose to engage in diplomatic and economic issues. Nigeria and South Africa have increased their reliance on the African Union for conflict mediation and governance training, bypassing UN-supported missions (International Crisis Group, 2024). In Asia, Indonesia, Vietnam, and the Philippines have increasingly prioritized the Association of Southeast Asian Nations (ASEAN) and the Regional Comprehensive Economic Partnership (RCEP) as the primary platforms for negotiating economic and security cooperation (ASEAN Secretariat, 2024). This reflects a broader trend: rather than relying on UNCTAD or the WTO, these countries are turning to regional forums they perceive as more responsive to their specific development needs and geopolitical realities. By investing diplomatic energy in ASEAN and RCEP, these countries demonstrate a preference for institutions that can deliver faster, regionally tailored outcomes, whether on trade liberalization, digital economy frameworks, or supply chain resilience. It underscores how the UN’s role in shaping global trade rules is diminishing, as states increasingly see greater value in regional arrangements that bypass slower, more gridlocked UN-led processes.

Brazil and Argentina are investing more diplomatic effort in the Community of Latin American and Caribbean States (CELAC), an independent platform  for trade and climate negotiations (Government of Brazil, 2024). Their pivot illustrates that countries are gravitating toward forums where negotiations are not slowed by the UN’s procedural gridlock or hampered by its budget-driven operational gaps. In CELAC, Brazil and Argentina can advance trade integration and regional climate initiatives with fewer political obstacles and faster decision-making. It shows that the UN’s weakening capacity is not only visible in its political deadlock but also in its declining role as the central arena for global economic governance. At the same time, India and China are expanding BRICS+ partnerships in development finance and digital regulation, presenting these forums as more representative of emerging global interests (Carvalho, 2025).

These shifts are fragmenting global governance and weakening the UN’s normative authority. China is actively promoting its digital governance framework across Southeast Asia through the Digital Silk Road, advancing a model based on state control and “cyber sovereignty” (MERICS, 2024). BRICS members are building parallel institutions, such as the New Development Bank and local-currency trade systems, to reduce reliance on Western-dominated financial structures (Das, 2024). As diplomatic and institutional alignments evolve, multilateralism continues to exist but no longer follows a universal model. Instead, the global order is shifting toward regionally grounded alternatives where the UN plays a more minor and more contested role.

These setbacks could expose a deeper structural vulnerability that calls into question the UN’s long-term capacity to act as a central node of global governance. The consistent inability to respond decisively in crises, coupled with the steady drift of states toward alternative regional forums, suggests that the organization’s legitimacy is at stake. If left unaddressed, this erosion risks cementing the perception of the UN as a secondary player in world affairs, with consequences that reach far beyond individual missions or mandates.

Financial Solution: Legal Dimensions of the UN80 Initiative

In order to keep the UN afloat in the future, Secretary-General António Guterres launched the UN80 Initiative in March, a reform program aimed to optimize operations, enhance effectiveness, and reinforce the UN’s role in a rapidly changing world. The initiative focuses on three main reforms: enhancing operational efficiency, reviewing the legal scope and execution of Member State-assigned mandates, and assessing structural changes along with programme realignment. These reforms aim for a cost-saving exercise through proposed budget cuts and staff reduction (UN Affairs, 2025). For example, departments for political and peacekeeping affairs may reduce personnel by 20% through eliminating overlapping functions. Other legally permissible cost-saving measures include consolidating all counter-terrorism functions under the United Nations Office of Counter-Terrorism (UNOCT), terminating high-cost office leases in line with procurement regulations, establishing a centralized services framework, relocating certain offices to lower-cost jurisdictions, and expanding the lawful use of automation and digital systems (Mishra, 2025).

Guy Ryder, Under-Secretary-General for Policy and chair of the UN80 Initiative Task Force, adds that this reform is not a cost-cutting exercise, but an effort to make the UN stronger. “Organisations have faced some wrenching decisions, and this is happening every day. That’s the reality of our circumstances. We have to reconcile the two objectives of making ourselves financially sustainable in the difficult circumstances we find ourselves in, but also be attentive, as always, to the impact that we have in delivering on our responsibilities under the Charter. If the UN is able to transform itself, to make improvements, sometimes through difficult decisions, that can mean those life-saving interventions reach the people we serve more effectively,” Mr. Ryder says (UN Affairs, 2025).

In addition, Guterres acknowledged that while the initiative can not directly remedy the liquidity crisis, it could mitigate its effects by ensuring funds are utilized efficiently and in accordance with budgetary rules. A transparent consultation with Member States regarding any reform measures will be maintained as the UN80 Initiative presents both a financial and legal opportunity to strengthen the UN system’s capacity in fulfilling its Charter-based mandates on peace, security, and development (Mishra, 2025).

Solving the Issue: Recommendations

If Member States continue to fail in paying their dues on time, worse consequences are bound to happen to those who rely on the UN’s support. While restructuring efforts and cost-efficiency measures are important, they alone are not sufficient to ensure the UN’s long-term ability to fulfill its mandate. Therefore,  it may be necessary to reassess and amend the UN Charter to impose stricter consequences on Member States that consistently fail to meet their financial obligations. However, in practice, this recommendation may face significant obstacles due to political realities. The Charter itself provides only two amendment mechanisms: Article 108, which allows for specific amendments, and Article 109, which enables a General Conference to review the Charter as a whole. In both cases, amendments require approval by a two-thirds majority of the General Assembly and subsequent ratification by two-thirds of UN Member States, including all five permanent members of the Security Council (Hathaway et al., 2024). This effectively grants the permanent members (the United States, the United Kingdom, France, Russia, and China) a decisive role, making substantive reform nearly impossible without their consensus. Their higher budget contributions, tied to their special responsibility for maintaining peace and security, already strengthen their influence within the UN system and allow them to shape outcomes in line with their own interests  (Chen, 2024). As a result, even if reforms were introduced to streamline bureaucracy or establish new rules to ensure fairness and compliance among all Member States, such measures might ultimately be ineffective, as the UN’s functionality remains heavily dependent on the cooperation and political will of the permanent five.

The UN can thus consider diversifying its funding sources, such as seeking support from private donors, philanthropic foundations, or global financial institutions, to reduce its dependence on unreliable state contributions. Second, the UN80 Initiative should actively include local communities. Local peacebuilders have provided valuable recommendations on how the UN can achieve greater impact in the field, yet their input is often overshadowed by think tanks and international NGOs. Locally developed programs tend to produce sustainable, long-term outcomes when they involve representatives from global, regional, and national peacebuilding networks in decision-making processes. These networks should help establish more appropriate financial mechanisms for impactful action in the field and decision-making in the hands of local communities.

Lastly, the UN80 Initiative needs to address the competition and fragmentation among UN agencies. This should include creating coordination mechanisms or collaborative teams within UN Country Teams (UNCT). Hence, this would foster mutual trust among UN Agencies, Funds, and Programmes (AFPs), define clear roles, and enhance information management (Kumskova, 2025).

Conclusions

In 2025, the UN is undergoing a financial crisis that is impacting its global-scale humanitarian programs, major agencies, and internal operations. The organization’s funds are decreasing at an alarming rate, and the current stream of income might not be enough to sustain it for much longer. The UN continues to face financial difficulties due to the lack of strict enforcement of member state contributions under Article 17 and Article 19 of the UN Charter. This has allowed major contributors to delay payments, resulting in reduced resources for essential programs and undermining the organization’s ability to fulfill its mission. Despite the UN80 Initiative introducing important reforms to enhance efficiency and realign operations, this has not been sufficient to address the ongoing liquidity crisis. Improving financial governance, exploring alternative funding mechanisms, and strengthening closer collaboration with member states and stakeholders can provide more sustainable foundations for the UN to continue to achieve its goals in the future.