EXPLAINER: Why is the UN facing 'financial collapse'?

The UN chief has told member states the organization is at risk of "imminent financial collapse," citing unpaid fees and a budget rule that forces the global body to return unspent money.

Secretary General Antonio Guterres has repeatedly spoken about the UN's worsening liquidity crisis. In October he warned of a "race to bankruptcy". Thursday's letter to all 193 member states was his starkest warning yet, and comes as its main contributor the US is retreating from multilateralism on numerous fronts.

"The crisis is deepening, threatening programme delivery and risking financial collapse. And the situation will deteriorate further in the near future," said Guterres, adding that money could run out by July. 

What is the UN and how is it funded?

The UN is the world's principal organization for deliberating matters of peace and security, but its work involves far more than peacekeeping and conflict prevention. 

Founded in 1945, the UN has 193 member states and also promotes human rights, fosters social and economic development, and coordinates humanitarian aid.

As a founding member of the UN and the host to its headquarters, the United States has always been a major funder. Under UN rules, contributions depend on the size of the economy of each member state. The US remains the largest donor and accounts for 22 percent of the core budget, followed by China with 20 percent.

This money finances the day-to-day operations of the organization and its primary activities, and approximately 26 percent of the UN peacekeeping budget. 

American headache

US President Donald Trump continues to make big cuts to US funding as he did in his first term. He is also reducing US engagement due to what he says is the UN's inability to solve global conflicts, agencies' politically divisive agendas, and the disparity in financial contributions among wealthier countries.

The US has slashed voluntary funding to UN agencies and refused to make mandatory payments to its regular and peacekeeping budgets.

According to the UN, around $1.6 billion was recorded in unpaid contributions at the end of 2025, more than twice as much as in 2024, even though more than 150 member states had paid their dues.

UN officials say the US currently owes $2.19 billion to the regular UN budget, another $1.88 billion for active peace-keeping missions and $528 million for past peace-keeping missions.

"The bottom line is clear," Guterres wrote. "Either all member states honor their obligations to pay in full and on time – or member states must fundamentally overhaul our financial rules to prevent an imminent financial collapse."

UN replacement?

Another major issue for Guterres, who is stepping down next year, concerning the future of his organization is Trump's latest attempt to sidestep the UN through his new Board of Peace.

The board to be chaired by Trump was originally envisioned as a small group of world leaders overseeing his plan for Gaza's future. Trump's ambitions have expanded to having the board as a mediator of worldwide conflicts, a not very subtle attempt to eclipse the Security Council, which is charged with ensuring international peace and security.

The four other veto-wielding members of the Security Council - China, France, Russia and the UK - have so far not joined Trump's board. Economic powers Japan and Germany are also keeping away.

Trump's secretary of state, Marco Rubio, tried to ease concerns last week, saying: "This is not a replacement for the UN, but the UN has served very little purpose in the case of Gaza other than the food assistance."

Guterres hit back on Thursday and said: "The basic responsibility for international peace and security lies with UN. Only the Security Council can adopt decisions binding on all, and no other body or other coalition can legally be required to have all member states to comply with decisions on peace and security."

Global support for UN

Amid the diplomatic chaos, UK Prime Minister Keir Starmer, who at the time had not responded to Trump's Board of Peace invitation, met with Guterres in London and reiterated "the UK's enduring support for the UN and the international rules-based system."

China has also expressed its support.

Speaking at a Security Council meeting on Monday, China's UN ambassador Fu Cong said: "No single country should dictate terms based on its power, and a winner-takes-all approach is unacceptable." 

He called for the UN to be strengthened, not weakened, and said the Security Council's status and role "are irreplaceable."

Financial reform

Guterres launched a reform task force last March, known as UN80, which seeks to cut costs and improve efficiency, reviewing the UN system and its mandates and examine potential structural changes. The aim is to build a stronger and more effective UN to better serve the world.

To that end, states agreed to cut the 2026 budget by around 7 percent to $3.45 billion.

Guterres is still warning cash could run out by the summer. 

Trump's Board of Peace is clearly shifting the status quo. Another major source for the UN's dire accounts is having to credit back hundreds of millions of dollars in unspent dues to states each year.

Guterres said the rule the UN must return unspent money on particular programmes to members if it could not implement a budget created a "double blow."

"I cannot overstate the urgency of the situation we now face. We cannot execute budgets with uncollected funds, nor return funds we never received."

As a result, the UN is now returning millions of dollars it never actually had.

Guterres added: "We are trapped in a Kafkaesque cycle expected to give back cash that does not exist," referring to author Franz Kafka who wrote about oppressive bureaucratic processes.

In his final yearly speech last month, Guterres, who will step down at the end of 2026, outlined his goals for the year, saying that the world was riven with "self-defeating geopolitical divides and brazen violations of international law."

When Guterres steps down on the final day of 2026, his successor will be hoping there will still be money in the bank to continue the works of the United Nations.