U.N.'s worst fiscal crisis forces restructuring bid to stay relevant

This analysis, first published by the International Peace Institute Global Observatory, has been edited with permission for clarity, length and style. It was written by Damian Lilly, an independent consultant who works on humanitarian, peace, and security issues. The views expressed represent those of the author and not necessarily those of IPI GO, the institute, or Arete News.

The United Nations faces its greatest financial crisis since its founding at the end of World War II. The effectiveness and efficiency of the U.N. system is under unprecedented scrutiny. While there has been talk of reform for years, structural changes are now firmly on the agenda. Even the potential merger of U.N. entities, once a taboo subject, is now openly discussed.

U.N. Secretary-General António Guterres, marking the world body's 80th year, launched the 'UN80 Initiative' earlier this year in a bid to ensure it "remains effective, cost-efficient and responsive to the people it serves" – and to reassure donors that taxpayer money reaches people in need.

The initiative builds on the vision laid out in the U.N. General Assembly's 2024 Pact for the Future and Guterres' 2021 Our Common Agenda report, and is a parallel effort to the 2023 UN 2.0 policy brief, which seeks to modernize the U.N. using more data and digital expertise, innovation capacity, strategic foresight, and behavioral science.

UN80 will develop proposals in three areas: identifying efficiencies and improvements in ways of working; reviewing the implementation of mandates from the U.N.'s 193 member nations; and conducting a strategic review of deeper, more structural changes and program realignment. It is not the first time the U.N. has embarked on a structural review.

It published a 2008 mandate review, a follow-up to the 2005 World Summit, that led to few changes. Earlier in his term, Guterres tried repositioning the U.N. development system and restructuring its peace and security apparatus. Now, however, many more U.N. core functions are at stake.

It is hard not to conclude that UN80 is also a response to aid cuts by the United States and other countries, although the secretary-general has denied this. Since U.S. President Donald Trump returned for a second term, his administration has caused serious harm to the world body, while other donors have also slashed their foreign aid. This has sent shock waves through the international aid system, forcing U.N. agencies to make massive budgets cuts and putting millions of lives at risk.

Coming months could bring still more pressure for the U.N. to significantly reform. In keeping with Trump’s so-called Department of Government Efficiency, or DOGE, which is trying to rapidly cut $1 trillion from the federal budget, the founders of DOGE-UN market a similar approach to tackling the U.N.'s "bureaucratic bloat, waste and inefficiencies."

Vuk Jeremić, the Serbian former foreign minister who ran against Guterres for the job of U.N. secretary-general in 2016, is reportedly using DOGE-UN as a platform for a possible campaign to replace Guterres when he steps down in 2027. The U.N.'s effectiveness and efficiency will likely be central themes in the race next year, and it not inconceivable that a populist politician could run on a ticket to radically downsize the world body.

An organization in retreat

Before Trump's election, multilateralism already was at a low ebb. For the past seven years, the U.N. has faced a liquidity crisis because not all members pay their dues in full or on time. No part of the organization escapes serious budgetary pressure. The peace and security pillar has suffered from diminished political support for some time.

The last new U.N. peacekeeping operation was deployed at Central African Republic in 2014. U.N. peace operations were recently forced to withdraw from Mali and Sudan and to scale back in Congo. This year's $5.59 billion peacekeeping budget is 44% less than 2018's $9.9 billion budget.

The UN’s development and humanitarian budget has, until recently, been relatively stable. However, the dismantling of the U.S. Agency for International Development, or USAID, changed that, given that the U.S. accounted for 40% of foreign aid globally, and many U.N. agencies greatly depend on U.S. funding.

These cuts are part of a broader trend of traditional donors, including the U.K., Germany, and France, slashing their aid budgets in recent years. Peak aid was reached in 2023, with official development assistance expected to fall from $213 billion in that year to $140 billion by the end of this year.

As a result, the International Organization for Migration made budget cuts affecting 6,000 staff; the Office for the Coordination of Humanitarian Affairs said it plans to cut its staff by a fifth; the U.N. refugee agency and World Food Program are reducing their costs by 30%; and the World Health Organization faces a $600 million hole in its budget. More U.N. agencies are expected to announce job losses and budget cuts soon.

Options for U.N. restructuring

Given this loss of funding across the board, there is now a serious imperative to restructure the U.N. This is no easy task given that any changes require approval from the member nations that provide different U.N. entities with their mandates. The U.N. is better at creating new agencies, offices, and envoys than it is at dismantling or consolidating them. One of the few examples of the latter was U.N. Women's creation in 2010 through the merger of U.N. Development Fund for Women (UNIFEM) and several other agencies that address women’s issues.

Political resistance to restructuring is likely to come from U.N. members that favor some agencies over others; reaching political agreement will likely take tough negotiation. Some U.N. agencies may resist change to defend mandates and jobs. Guterres' lame duck status near the end of his term may make it harder for him to push through needed reforms.

Given the severity of the financial crisis, it is hard to argue that now is not the time for major restructuring. Proposed reforms will not eliminate the impact of budget cuts, but their consequences could be limited by applying more effectiveness and efficiency. This will take strong justification for eliminating duplication and enhancing synergies, and a pivot toward areas where the U.N. clearly adds value by helping address future challenges.

Possible areas for restructuring

Peace and security – A previous restructuring in 2019 merged two departments for political affairs and peacebuilding, reformed another one for peace operations, and created shared regional divisions. Some argued it could have gone further, but some member nations opposed Guterres' ambitious proposal. More integration or a merger of the new departments would align with Pact for the Future's vision. A review this year offers a chance to keep bridging peacekeeping and peacebuilding.

Human rights and protection – The smallest the U.N.'s 'three pillars' is a cross-cutting issue. Guterres launched a 'call to action' in 2020 that led to the U.N.'s Agenda for Protection in 2024, but it was a missed opportunity. No restructuring or elimination of significant redundancies resulted. A more comprehensive approach to protection could streamline mandates and improve efficiency. The U.N. human rights office, OHCHR, faces financial pressures, but could have a stronger coordination role.

Humanitarian-development nexus – This area might offer the best opportunity for a shake-up. Much has been said about it but the current approach is failing and needs an overhaul. A more radical approach for UN80 would include a merger of the Office for the Coordination of Humanitarian Affairs and the Development Coordination Office in New York to centralize field support and integrate operations.

Food – UN80 could be used to propose saving millions of dollars in cost efficiencies by merging the Food and Agriculture Organization and World Food Program, both of which struggle financially. WFP, an operational humanitarian agency, came about in 1961 as an offshoot of FAO, a provider of technical expertise in food security. In recent years, WFP added long-term resilience programs to its life-saving food aid, while FAO expanded into emergency response – with growing competition between the agencies. WFP and FAO signed a 2023 memorandum of understanding to better collaborate, but this faces many challenges.

Health – UNAIDS, which was established in 1996 to strengthen U.N. leadership in HIV prevention, treatment, care and support, could be folded into the World Health Organization. HIV remains a serious concern in many countries, yet having a U.N. agency dedicated to a single disease may become harder to justify financially.

Migration – Some overlap exists between the U.N. refugee and migration agencies, UNHCR and IOM. It could make sense to combine their work, especially on internally displaced persons, though they operate by different legal frameworks and carefully distinguish between the rights of refugees and migrants.

Population and sexual and reproductive health – Over the past three decades, population-related issues become a smaller part of the work of the U.N. Population Fund, or UNFPA. Instead, it took on more issues about sexual and reproductive health and gender equality, causing duplication with the work of U.N. Women. Considering the large funding cuts facing UNFPA, there could be proposals under UN80 to abolish the agency and transfer some of its work to agencies such as UNICEF and the U.N. Development Program, while focusing U.N. Women on gender inequality.

Climate – Rising temperatures and sea levels from human-induced climate change have become an increasing priority for the U.N., but no single agency coordinates this work system-wide. If the U.N. were to focus on making cost-saving reforms in just one area, this would probably be it.

Make-or-break time

Restructuring and merging U.N. entities are not a panacea for the U.N.’s problems, and should be done only if they lead to a more effective and efficient organization.

The options could be discussed as part of UN80; anyone working in the U.N. will likely have their own ideas. It is vital that UN80 prompts an open debate about how the U.N. could be structured to stay relevant. Guterres will report on UN80 proposals to the General Assembly in July.

While it’s hard not to see this as a bleak time for the U.N., its financial crisis brings an opportunity for restructuring. Many of the problems are well known but have not been addressed due to a lack of political will. Today’s reality permits no more excuses. The U.N. must seize the moment.