UN to do more with less in Bhutan as budget cuts and resource shortages bite

2026-03-09 - 09:04

The UN Secretary-General António Guterres recently warned that the organization could face “financial collapse” by June 2026 if states fail to settle outstanding payments. The UN is in its third year of a cash crunch, and while the USA is still the largest contributor, it is not doing the heavy lifting anymore. Other countries are not taking its place and are instead also cutting back, with slowing economies, conflicts like the Ukraine war, and rearmament taking focus. In its 2026 budget, the UN is cutting its budget by 15.1 percent or USD 577 mn, and 18.8 percent of its manpower. The USA is the largest contributor and donor to the United Nations, but it owes USD 4 billion (bn) in back dues, which is 95 percent of total outstanding contributions owed by all member states, of which it only paid USD 160 million (mn) recently. In late December 2025, the US pledged USD 2 bn in funding for UN humanitarian programs, warning the international organization must “adapt or die,” but this is only a fraction of the USD 17 bn it spent in 2022. On 7th January, the USA announced that it is withdrawing from 31 United Nations entities, in addition to earlier withdrawals from the UNHRC, UNRWA, UNESCO, and the World Health Organization (WHO). Other countries, such as the UK and Germany, have also announced significant reductions in foreign aid, which will inevitably impact the UN’s work. The unpaid dues are straining UN operations, with the US now accounting for the vast majority of unpaid contributions. Impact on Bhutan The cutbacks in the UN will impact Bhutan, where the UN collectively is the second-largest grant and assistance pledger after India, at USD 200 mn or Nu 16.600 bn for the 13th Five-Year Plan. The WHO in Bhutan is planning to cut around 30 percent of its budget, and do more with less while prioritising more important programmes. WHO Representative Bhupinder Kaur Aulakh wrote to the Ministry of Health (MoH) and the Ministry of Finance (MoF) last year about the cutback. The indicative estimate that the MoH requires from the WHO in the 13th Five-Year Plan is Nu 1.170 bn, but this will be reduced. She said that in Bhutan they are saving money by combining workshops, holding them in Thimphu, using Zoom, and similar measures. The WHO has also asked the MoH to prioritise its top programmes, as not everything can be implemented with the reduced resources, and discussions are ongoing. The WHO is currently helping Bhutan with non-communicable diseases, pandemic preparedness, health emergencies, laboratory equipment, primary health care, malaria eradication, and more. She said that all the other UN agencies in Bhutan are in the same situation and are also expected to make cutbacks and “do more with less.” UN agencies will do more with less The Bhutanese asked all the UN agencies how the cutbacks would affect their programs and activities in Bhutan, and they gave a joint response to the paper. It said the United Nations globally is navigating a challenging financial context. Between 2024 and 2026, overall UN system resources are projected to decline by approximately 25 percent. In response, the Secretary-General launched the UN80 Initiative, a system-wide effort to modernize operations, reduce duplication, improve efficiency, and strengthen collective delivery, with a clear emphasis on protecting frontline impact at the country level wherever possible. The UN said these reforms are not about withdrawing support, but about ensuring that every mandate, dollar, and partnership delivers maximum results for people and the planet in a more coherent, accountable, and future-ready UN system. The UN stated, “In Bhutan, the UN remains fully committed to supporting the priorities of the 13th Five-Year Plan through the UN Sustainable Development Cooperation Framework (2024–2028), aligned with national priorities including inclusive economic growth, human capital development, climate and environmental resilience, digital transformation, and support for vulnerable groups.” It said that while the global funding landscape is more constrained, the immediate operational impact in Bhutan remains limited. “UN agencies are working closely with the Royal Government of Bhutan to recalibrate and prioritize where necessary, safeguard critical programs, particularly life-saving and life-sustaining interventions, and enhance joint delivery under the leadership of the Resident Coordinator,” the UN added. It said that in the current environment, the focus is on doing more with available resources by strengthening upstream policy support, consolidating back-office functions where feasible, avoiding duplication, expanding joint programming, and diversifying partnerships, including engagement with the private sector and non-traditional donors. It said any adjustments will be guided by national development needs and undertaken in close consultation with the government to ensure that support to the people of Bhutan continues in a strategic, efficient, and sustainable manner aligned with the needs and priorities of the country. LDC impact What complicates matters for Bhutan is that it graduated from Least Developed Country (LDC) status on 13th December 2023, meaning it will lose LDC support measures such as preferential market access and special financing or cheaper loans, though support is extended until 2028 under a transition plan. Much larger economies like Bangladesh and Nepal, which were supposed to graduate earlier, received an extension until November 2026, and both countries are reportedly considering seeking further extensions. MoF official explains UN role An official from the Ministry of Finance said that every year there is a joint RGoB–UN steering committee meeting, and the most recent meeting was held in January 2026 to discuss the programs for the next year. However, the issue of cutbacks did not come up officially. Unofficially, however, there were indications that efforts are being made to cut operational costs and expenses, and that the situation has been quite challenging globally. The MoF said officially that it is under the impression that whatever the UN has committed for the 13th Plan will be delivered unless there is official communication to the contrary. The official said that if there is a cutback, it may be internal within the UN system in terms of staff reductions, reduced expenses, and optimization, though nothing can be confirmed until the next coordination meeting. The MoF official said the USD 200 mn does not come directly to Bhutan as cash. The UN often uses the funds to hire and provide technical expertise or technical assistance. The UN also helps Bhutan mobilize funds, though its own core funds for Bhutan are limited. As an accredited body, the UN helps Bhutan access climate funds from organizations such as the Green Climate Fund (GCF) and the Global Environment Facility (GEF), and charges between 8.55 and 12 percent of the funds as project management fees. The official said the UN has an immense network and is able to mobilize experts in various fields from its global offices, covering everything from policy to technical issues. The official added that the LDC graduation has not significantly impacted Bhutan yet, and for now the changes are minor, such as the UN sponsoring only two participants instead of a full delegation for conferences. The official said UN activities in Bhutan are multiple and fragmented, and the organization no longer conducts large-scale programs such as school feeding programs or mass vaccination campaigns, as Bhutan has developed its own capacity. The UN now mainly plays a technical, advisory, coordinating, and training role. WB and ADB step up The official said what has really helped Bhutan in terms of both grants and loans from multilateral agencies is the World Bank (WB) and the Asian Development Bank (ADB), as they do not rely on LDC status but use different criteria based on Bhutan’s size, debt stress, and economic vulnerability, making Bhutan eligible for grants and concessional loans. This is why Bhutan has been receiving 50 percent grant and loan financing for various projects from the ADB and the WB. The ADB has committed USD 34.48 mn in grants for the 13th Plan, and the WB has committed USD 40 mn, though additional grants and concessional loans also extend beyond these commitments. Both banks are also helping Bhutan access funding and concessional loans from the IBRD and IFC for hydropower projects such as Dorjilung and others. India’s grant commitment to Bhutan for the 13th Plan is Nu 85 bn, with another Nu 15 bn outside the plan under the ESP. All other donors combined are providing Nu 40 bn in grants. Another senior MoF official said that Bhutan represents a very small portfolio for the UN, and therefore there should be no difficulty in mobilizing resources for Bhutan. The official, speaking about the WB’s role, cited the USD 300 mn financing package approved in May 2025 for Bhutan’s Accelerating Transport and Trade Connectivity in Eastern South Asia (ACCESS) Phase 2 project, of which around half is grant. The senior official said the EU also provides grants and that its budgetary support is very flexible. The EU has committed USD 14.98 mn for the 13th Plan. A head of an international agency in Bhutan (not from the UN) told this reporter that it is becoming increasingly difficult to raise funds for Bhutan, as Western countries are preoccupied with the Ukraine war, economic challenges, defence spending, and a growing nationalistic shift. The senior MoF official said that this is why it is important for Bhutan not to rely solely on donors, but to broaden the tax base and strengthen domestic revenue generation.