Advisory Commission of the United Nations Relief and Works Agency for Palestine Refugees in the Near East
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1 WA UNR Advisory Commission of the United Nations Relief and Works Agency for Palestine Refugees in the Near East Distr.: General Date of Distribution Original: English UNRWA/CN/SR/2008/04 Extra-ordinary Session Advisory Commission of the United Nations Relief and Works Agency By video-conference linking the West Bank Field Office, the Syria Field Office, Headquarters Gaza and Headquarters Amman 30 April 2008 Contents Opening of the Extra-ordinary session by the Chairperson Introductory Statement by the Commissioner-General The Impact of Recent Economic Trends on UNRWA Finances Concluding remarks by the Commissioner-General Closing statement and summary by the Chairperson
2 The meeting was called to order at 9.10 a.m. Opening of the Extraordinary Session by the Chairperson 1. The Chairperson opened the Extraordinary Session of the Advisory Commission. He stressed the importance of partnership in addressing UNRWA s urgent financial situation. The Chairperson thanked donors for their support to UNRWA and, given the current situation, called for increased contributions. He appealed to the international community to assist in improving access in the occupied Palestinian territory and to end Israeli aggression. He reconfirmed Syrian support and partnership with UNRWA. Introductory Statement by the Commissioner-General 2. The Commissioner-General (Ms. AbuZayd) thanked participants for responding to her call for an Extraordinary Session of the Advisory Commission. The meeting was called at this moment to brief stakeholders well in advance on factors causing UNRWA s financial vulnerability. 3. With the rise in cost of living across the region, staff have been asking for increased salaries. As staff salaries constitute a significant portion of expenditure, any unbudgeted increases to salaries exert huge pressure on the Agency s finances. In discussions with staff, UNRWA emphasizes the importance of adhering to the pay policy and brings attention to the funding shortfalls which prevent UNRWA from acceding to their demands. The Commissioner-General requested the Chair s permission to invite the Staff Union representative to address the meeting. With the Chair s agreement, the Commissioner-General invited the participation of the Staff Union Representative. 4. Three features have raised the Agency s level of financial exposure: an existing commitment to enhance service standards, global economic volatility and fluctuations in currency values.
3 5. UNRWA is responding more efficiently and effectively to the human development needs of Palestine refugees. This commitment underpins many of the Agency s initiatives and practices, such as the organizational development process, the adoption of a budget based upon verifiable refugee needs and a poverty based approach to assisting special hardship cases. The necessary funding to bring these improvements into effect, however, has not been secured. As a result, UNRWA is forced to forgo strategic undertakings and must consider reducing the scope of services. Refugee needs remain, and even expand, when we fail to address them. 6. The Commissioner-General expressed gratitude to donors who have increased contributions over the past two years. However, UNRWA s unfunded requirements, or the funds needed in the General Fund to work towards human development objectives, stand at US$ 98.8 million. In addition to this amount, and of immediate concern, is the gap of US$ 18.5 million between predicted income and estimated expenditure by end of UNRWA will continue the practice of managing its deficit by addressing only the bare minimum of refugee needs. However, constant deficit management cannot be sustained in an environment of global economic turmoil and escalating operational costs. 7. The world-wide economic downturn, uncertainty in financial markets and an unprecedented increase in food and energy prices are having a significant impact on the Agency s finances. Global energy and food prices will continue on an upward trend and, in turn, significantly impact the cost of operations. 8. The devaluation of the dollar has had both a positive and negative impact on UNRWA s finances. Substantial contributions are made in Euros, while the largest portion of expenditure, notably staff salaries, is in US dollars. This devaluation has enabled the Agency to bolster finances and manage the account deficit. However, the devaluation of the dollar is also cause for losses because it contributes to higher operational costs and higher salaries for staff in Gaza and the West Bank.
4 9. The Agency is facing chronic financial vulnerability, which at present is managed through prudent financial management and over reliance on volatile exchange rate values. In a global atmosphere of deepening economic unpredictability, there is potential, if we continue with the current ad hoc approach, for a precipitous decline into financial free fall. The Commissioner-General appealed for assistance in establishing a more solid and dependable basis for implementing the international community s collective responsibility towards Palestine refugees. The Impact of Recent Economic Trends on UNRWA Finances 10. The Deputy Commissioner-General (Mr. Grandi) briefed the meeting on the impact of recent economic trends on UNRWA s immediate financial sustainability, as well as the current financial situation. 11. UNRWA has a Budget of US$ 541 million in 2008, including US$ 98.8 million in unfunded requirements. Several activities in 2007 had been placed in unfunded requirements for 2008 in the hope that income would exceed expenditure. Of great concern is an additional projected shortfall of US$ 18.5 million in This deficit is a result of global economic trends, including currency fluctuations and the increased cost of food, medicine and fuel. 12. Salary increases, directly resulting from global economic trends, are having a profound impact on UNRWA. Staff salary increases represent the largest proportion of the US$ 39.2 million in unbudgeted expenditure for Area staff salaries are determined by a comparator against host governments. Some Host authorities have recently increased salaries in their respective public services. UNRWA staff have therefore also received a pay raise. This trend is likely to continue throughout UNRWA s area of operations. Traditionally, UNRWA salaries have compared favorably to host governments. The margin has eroded, particularly in the fields of information technology and procurement, and qualified staff are leaving for better paid positions. Moreover, purchasing power has decreased. For example, a sanitation laborer in Jordan now spends 70 to 80 percent of his/her income on food and transportation.
5 13. The increased cost of food, fuel and medicine has not only impacted staff salaries, but has also resulted in higher operational costs. Expenditure for the regular food aid programme has grown from US$ 35.5 million in 2007 to US$ 63.5 million in 2008 due to a doubling of commodity prices. With projected income for this programme estimated at US$ 47.5 million and the discontinuation of more earmarked funding, namely contributions to the cash component of the food programme, the General Fund has had to sustain the shortfall. The lack of adequate food resources and the management of food security is of particular concern in the occupied Palestinian territory where needs are increasing. In the West Bank, for example, a more prioritized approach to food aid has resulted in painful negotiation with the camp committees. The Deputy Commissioner- General thanked the Government of Syria for allowing UNRWA to continue to purchase fuel at a reasonable cost. 14. The Agency is managing the US$ 18.5 million deficit through measures such as postponing the filling of vacancies and reducing the already limited training. This is over and above the inability of the Agency to implement activities under the unfunded requirements. At this difficult juncture, therefore, not only is the Agency unable to improve quality, it is unable to sustain essential operations. Furthermore, the well funded and supported organizational development programme is in serious jeopardy. This could affect progress on vital reforms and the stability of UNRWA s operational environment. 15. The financial outlook for 2009 is even more worrying. While the implementation of OD, simplification of processes, and staff reviews are expected to result in some savings, these initiatives will not address the expected deficit. Given current exchange rates, the projected shortfall is US$ 31.8 million. However, if the US dollar increases in value to 1.4 against the Euro, the 2009 deficit would increase to US$ 65.2 million. The Deputy Commissioner-General emphasized that the situation is not sustainable. With 88 percent of UNRWA staff providing direct delivery of services, there is no room to cut. Prioritizing amongst services is also sensitive and would furthermore come at a time of financial hardship for many staff.
6 16. The Deputy Commissioner-General looked forward to further discussion on UNRWA s financial situation at the June meeting of the Advisory Commission. 17. The Chairperson of the Inter Staff Union Council (Mr. Al-Arqan) expressed gratitude for the opportunity to represent both staff and refugee needs to the Advisory Commission. In the occupied Palestinian territory, refugees are experiencing rising violence, closure and socio-economic hardship. Poverty in Gaza refugee camps has risen to more than 90 percent and unemployment exceeds 40 percent in the West Bank. 18. Following the declaration by the United Nations of Phase IV in Gaza, most international staff at UNRWA headquarters were relocated. Despite increased insecurity and without hazard allowances, area staff remain dedicated to providing essential services to Palestine refugees. He expressed appreciation to staff in other fields of operation who continue to serve Palestine refugees while their counterparts in other UN organizations and government receive higher salaries. He noted that the Jordanian government provided a salary increase to civil servants of between JD 45 and 50 in response to the rising cost of living. 19. The increased cost of living has compelled UNRWA to increase salaries, which in turn has put additional pressure on the Agency s budget. He appealed to the international community to financially support UNRWA. He argued that without sufficient funding, the quality of services and staff expertise would deteriorate. The union representative closed his remarks by thanking the Commissioner- General for her continued presence in Gaza. 20. The Chairperson thanked the Chairperson of the ISUC for speaking on behalf of UNRWA area staff and those suffering in the occupied Palestinian territory. He thanked UNRWA staff for the sacrifice they have made in delivering services to Palestine refugees. 21. The Representative of Spain (Ambassador Ansoain) thanked the Commissioner- General for calling the extraordinary meeting and for UNRWA s transparency in communicating the funding situation to hosts and donors. The volatile economic trends have led to a deeply worrying budget shortfall and require additional efforts from donors. Restricted access as a result of Israeli closure in the West
7 Bank and Gaza has led to higher costs to UNRWA. Spain will support efforts to implement the Agreement on Movement and Access and encouraged others to discuss this matter bilaterally with Israel. The reconstruction of Nahr el-bared has placed an additional stress on the financial resources of the Agency. 22. He commended efforts to diversify income and encouraged the implementation of the resource mobilization strategy. The Ambassador shared the experience and success of the Spanish Friends of UNRWA Committee in advocacy and fundraising. He suggested expanding this model to other countries. Spain took note of the precarious financial situation and would study the possibility of increasing support to the General Fund. 23. The Representative of Norway (Ms. Lochen) noted that Norway contributed in Kroners. She acknowledged the serious financial situation and urged donors to review their 2008 contributions and to make early payments to the General Fund. 24. The Representative of Sweden (Mr. Kirst) said that the financial situation appeared to have worsened. Sweden has increased funding in previous years, is in the process of determining its 2009 contribution and will consider the information presented during the meeting. He commended UNRWA for working to expand the donor base, and underlined that assistance to Palestine refugees is a collective effort. 25. The Representative of Jordan (Mr. Abu Awwad) expressed concern regarding the financial situation and its implications for host countries, UNRWA staff and Palestine refugees. UNRWA staff should be supported. He suggested the creation of a mechanism to resolve the shortfall and thereby ensure the continuity of essential services. He stated that hosts are already major donors and called upon donor countries to bolster their financial support. Support from the international community to UNRWA is essential until a just solution for Palestine refugees has been reached. He emphasized UNRWA s role in contributing to stability in the region. 26. The Representative of the PLO (Mr. Abu Baker) said that the already difficult situation faced by Palestine refugees continues to deteriorate and urged donors to
8 increase their assistance. UNRWA must continue to provide essential services to Palestine refugees until a negotiated peace has been achieved. 27. The Representative of Switzerland (Ms. Vege) noted that the international community shares a collective responsibility in improving UNRWA s financial situation. She suggested that the Agency s 60 th anniversary could be used as an opportunity to highlight challenges and funding needs for the General Fund. 28. The Representative of the United Kingdom (Mr. Nour) said that, given the grave financial situation, stakeholders can no longer call upon UNRWA to prioritize. Refugees are suffering from a decreased level of service. He encouraged other donors to follow the DFID model of multiyear funding with annual increments. 29. The Representative of the United States (Ms. Kaplan) expressed concern about the deteriorating socio-economic situation and its impact on UNRWA staff and Palestine refugees. She asked for further clarification on unfunded requirements. 30. The Representative of Denmark (Mr. Holmboe) shared concerns regarding the financial situation and said that Denmark would consider the possibility of a further increase to the General Fund. He asked for further information regarding the impact of price increases on UNRWA staff, the staff salary comparator and the relationship between demand on UNRWA services and the deteriorating socio-economic situation. 31. The Representative of Japan (Mr. Nakashima) expressed concern, in particular, with the increased cost of food. He mentioned that the issue of food aid will be discussed at the upcoming meeting of the G8 hosted by Japan. He confirmed that Japan would implement food assistance in the occupied Palestinian territory as soon as possible. 32. The Senior Fundraising Executive, UNRWA (Mr. Ford) said that UNRWA efforts at attracting support from the Arab region have paid dividends. In 2007, funding from the Arab world amounted to US$ 16 million while UNRWA has already received pledges amounting to US$ 15.2 million in Support from the Arab world, however, has focused on emergency appeals and projects, with only US$ 2 million marked for the General Fund. He suggested that members of
9 the Advisory Commission should encourage Arab countries to contribute further towards to the General Fund. 33. The Chairperson reconfirmed Syrian support for Palestine refugees, especially during this difficult period. He noted that since the 2004 Geneva conference, hosts, donors and UNRWA have strengthened their partnership. He expressed confidence that with renewed efforts, the current challenges faced by UNRWA could be met. 34. The Deputy Commissioner-General (Mr. Grandi), in response to questions raised during the discussion, referred members and observers to the interim programme strategy list of unfunded requirements. With sufficient funding, UNRWA could meet international norms and standards. The Agency is currently operating below norms with detrimental effects, especially in Gaza, the West Bank and Lebanon, to the quality of services provided. He reminded participants that, while the focus of the extraordinary meeting was on the General Fund, the significant under funding of the emergency appeal should not be forgotten. 35. He explained that there is not a fixed differential between UNRWA and host government salaries. The differential, normally between 10 and 20 percent, is now shrinking. Given the rising commodity prices, the purchasing power of area staff has decreased. Between July 2007 and March 2008, the cost of food had risen by 20 percent and cost of living had increased by 15 percent while UNRWA salaries had increased on average during the same period by about 7 percent. 36. The Commissioner-General (Ms. AbuZayd) explained that in Syria, many area staff are unable to get through half of the month on their salary. She clarified that UNRWA salaries compared positively against host governments because of high demands placed on dedicated and committed area staff. Concluding Remarks by the Commissioner-General 37. The Commissioner-General (Ms. AbuZayd) thanked Members and Observers for their participation and understanding of UNRWA s delicate financial situation. She thanked those countries who committed to additional and multiyear
10 funding and welcomed the suggestion of enhanced advocacy on the occasion of the Agency s 60 th anniversary. She urged members of the Advisory Commission to encourage Arab countries to increase their contribution to the General Fund. 38. At the recent meeting of the UN Chief Executives Board, she explained that because UNRWA has more staff than any other UN agency, global trends are having a particularly acute impact on the Agency. She called upon participants to raise the urgent matter of UNRWA s financial situation with their capitals and come with specific comments to the June meeting of the Advisory Commission. Closing Statement and Summary by the Chairperson 39. The Chairperson thanked the Commissioner-General and UNRWA for their unwavering support to Palestine refugees. He emphasized the importance of partnership in ensuring continuity and quality of services. The Chairperson expressed hope that by the next session of the Advisory Commission in Damascus, both the refugees and the Agency would find themselves in better circumstances. 40. The Chairperson closed the extraordinary meeting. 41. The meeting rose at 11:07 a.m.
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