Financing the UN Development System
Pathways to Reposition for Agenda 2030
The UN development system currently faces an extraordinary opportunity to reaffirm its role and relevance in a rapidly changing world. The ambition and broad scope of the 2030 Agenda for Sustainable Development both demands and emboldens this reform of the UN development system.
With the function of the system increasingly dictated by the nature of the funding it receives, the issue of financing is at the centre of any credible repositioning. That being said, it is far from clear what the appetite is for financing reform and which reforms should be prioritised.
This third annual report on financing the UN development system seeks to contribute to the debate by providing a thorough overview of the revenue, income sources, and expenditure of the UN development system. It gauges the major trends, opportunities and challenges around financing, while also presenting five possible pathways along which the UN development system can reposition for Agenda 2030.
The following is an overview of the findings of the larger report, ‘Financing the the UN Development System: Pathways to Reposition for Agenda 2030’.
There is a wealth of statistical information available about the UN development system (UNDS), yet it needs to be provided and presented in a manner that lends itself to making informed decisions that align finance to policy direction and positioning.
Here we strive to accessibly present the revenue, income sources and expenditure of the UNDS, which in principle represents the entities of the UN system that undertake development activities.
To preface, the table below provides an overview of the six types of financial instruments currently in use in the UN system, which are essential to understanding UN financing and the subsequent sections.
In 2015, the total revenue for the UN system as a whole was US$ 48 billion. Of this, US$ 9 billion was for peacekeeping and close to US$ 27 billion was for operational activities for development (OAD), with almost US$ 21 billion going to five entities (UNICEF, UNDP, WHO, WFP and UNHCR) (see Table 1).
Out of the total US$ 48 billion more than half was earmarked contributions (53%), meaning the funding was tied to a theme or a country. Assessed contributions, those that can broadly be defined as the price of membership, made up 30%, while core funding—voluntary untied contributions—made up 10%.
The ratio of core to earmarked funding thus remains very uneven. In addition, assessed and core resources, both non-earmarked funding flows for the work of specific UN organisations, have stagnated in real terms.
Meanwhile, an analysis of individual agencies’ assessed contributions over the past 40 years points to a correlation between agencies with a high ratio of assessed funding and the specificity of their agencies’ responsibilities (see Table 2). This indicates that where functions are clearly demarcated and the benefits of club membership are immediate, assessed contributions are easier to come by.
Another characteristic of the revenue landscape is that there has been a significant increase in the volume of humanitarian assistance. Analysis of the comparative growth rates of funding for operational activities over the past 15 years, clearly shows the significant rate of growth of humanitarian compared to development funding.
Then a look at the funding of the UN system by major functions—based on the definitions of functions used by the UN for its data collection—shows that operational activities for development represent some 60% compared to peacekeeping at 20%, and norms, standards,policy and advocacy at 20%.
With regard to income sources, 32% of multilateral aid is channelled through the UNDS (see Figure 4). While this represents the largest allocation of any of the major multilateral players, it is also the only one channel in which earmarked contributions far outstrip core/assessed contributions. The UNDS is unique in this dependence on earmarked funding, as seen in the graphic below.
The data also highlights the highly-concentrated character of contributions to UN agencies: 47% of contributions to UN operational activities in 2015 came from only three donors (US, UK and Japan), while the top ten donors accounted for 73% of the total contributions. It is also notable that nine of the ten major contributors provided more earmarked than core contributions.
A small portion of the earmarked funding to the UNDS meanwhile consists of contributions to UN pooled funds, financing that supports jointly-agreed UN priority programmes. In 2015 pooled funds accounted for 6% of total contributions to operational activities for development. The top 12 contributors accounted for 92% of the US$ 1.5 billion total contributions to UN pooled funds of which the largest four donors alone account for 64%.
The data also shows pooled fund contributions for humanitarian purposes have been about two thirds of the total deposits in recent years. Pooled funding for transition and crisis-affected situations shows an upward trend, while other development-related interventions received less funding.
The collection of data relating to income from non-state contributors to the UNDS is difficult to assemble across the UN system; however, data has been analysed for five major organisations: UNICEF, UNDP, UNHCR, WFP and WHO. This shows a broad range of experience, with some agencies having great success in attracting non state income from individual contributions while others rely more on foundations, for example.
In a limited number of cases, the volume of non-state income represents a significant amount for the agency concerned. UNICEF is a prime example with close to US$ 1.5 billion in non-state income, with 79% coming from individual donors (national committees).
With regard to the profile of expenditures, the report reviews expenditure by agency, by year, by country income status and by region.
Of note is an overview of the OAD expenditures broken down by country income category. This shows that average UN expenses per country are highest for low income countries and decrease as countries move into low and upper middle income status and on to high income status. However,one element of the expenditure pattern is similar for all countries irrespective of income categories: by far the largest portion of UN expenditures is funding from earmarked resources.
The figure also shows that expenditures in crisis-affected countries, a group of countries that spans the four income categories, have the highest level of UNDS spending per country, with the expenditures for humanitarian and development related interventions reaching on average US$ 329 million per country.
An overview of the geographical distribution of the UN’s operational spending by region shows that with 37% the Africa region is the largest beneficiary of UN operational activities, followed by the Western Asia region with 19% of total expenses and Asia and Pacific region accounting for 15% of the total.
The Western Asia region continued the trend already noted in last year’s report of receiving an increasing portion of the UN’s overall operational expenditures. This continued growth is directly related to the number and severity of the crises that have affected this region in recent years.
With the basic data around UNDS financing in mind, what then are the major opportunities and challenges around financing the UN system? What financing reform is needed to help the UNDS meet the challenges of Agenda 2030?
These questions are debated and explored in the papers by senior contributors from inside and outside the UN system outlined below. Grouped along five key clusters, they provide fresh perspectives and ideas on pathways to financing reform, which can help the UNDS reposition for Agenda 2030.
ONE: FINANCING THE UN DEVELOPMENT SYSTEM– STATUS QUO, REGRESSION OR EVOLUTION?
From Funding to Financing – beginning the journey
By Richard Bailey
Reforming the World Health Organization’s financing model
By Dr Gaudenz Silberschmidt and Dr Guitelle Baghdadi-Sabeti
Rising powers in United Nations development funding – Growing responsibilities, growing engagement?
By Sven Grimm and Zhang Chun
Scaling up financing for the poorest countries through innovation
By Lisa Finneran and Annely Koudstaal
Strengthening bilateral finance for multilateralism: Considerations for the United Nations system
By Romilly Greenhill and Nilima Gulrajani
A new contract for financing the UN development system: What does it mean and how can it be achieved?
By Max-Otto Baumann and Pratyush Sharma
TWO: THE VALUE OF LEVERAGING
Mobilising private finance in the era of the Sustainable Development Goals
By Gavin Power and Moramay Navarro Perez
Business and the Sustainable Development Goals: Why it matters
By Sahba Sobhani and Robert de Jongh
From fund-raising to market transformation
By Eric Usher and Careen Abb
The promise of ‘blended finance’
By Homi Kharas
Blended finance in fragile contexts: Opportunities and challenges
By Cordelia Lonsdale and Sarah Dalrymple.
UN pooled funds: A game-changer in financing Agenda 2030
By UN Multi-Partner Trust Fund Office
THREE: FINANCING PREVENTION AND SUSTAINING PEACE
Financing for peace
By Stephan Massing
Financing sustainable peace: The right way
By Rachel Scott
Is peacebuilding cost-effective?
By the Institute for Economics and Peace
The potential of innovative financing to sustain peace
By Kevin Starace, Commissioned by the Dag Hammarskjöld Foundation and UN MPTFO
Financing the prevention of violent extremism
By Khalid Koser
FOUR: BUILDING NORMS, PROVIDING GLOBAL PUBLIC GOODS AND MEETING THE CHALLENGE OF MIGRATION
A global platform for support of norms, standards and monitoring in development cooperation
By Stephan Klingebiel and Li Xiaoyun
Global norms: Building an inclusive multilateralism
By the Dag Hammarskjöld Foundation
Multilateral development banking for 21st century challenges: Addressing global public goods
By Scott Morris and Priscilla Atansah
The Green Climate Fund – The ‘new kid on the block’
By Manfred Konukiewitz
Why the United Nations should embrace the concept of global public goods
By the Dag Hammarskjöld Foundation
Who will pay for safe, orderly and regular migration?
By Sarah Rosengaertner
FIVE: FINANCIAL TRANSPARENCY AND ACCOUNTABILITY: LOW HANGING FRUIT?
Open budgeting and monitoring for the Sustainable Development Goals: A country-level perspective
By Claire Schouten and John Hendra