3.299 The Seventeenth Session of the Conference requested the Finance Committee “to undertake a study of the effects on the contributions assessed on Member Nations, and on the budget of the Organization, arising out of fluctuations in the rates of the monetary unit used by the Organization in the preparation of its budget.” and agreed that the Committee “should as far as possible, taking into account the study outlined above, the Gross National Product of Member Nations, the assessment criteria presently used by the United Nations Committee on Contributions, and the role and responsibilities of FAO, submit to the Council with a view to consideration by the Eighteenth Session of the Conference, a report which could serve as a basis for discussing whether or not FAO's scale of contributions should continue to be derived from the prevailing scale of assessments of the United Nations. This study should in no case modify the decision adopted by the United Nations Resolution 2961 D (XXVII) in which the minimum contribution of developing nations was reduced from 0.04 percent to 0.02 percent.”1
3.300 The Finance Committee took into consideration in its review detailed information relating to economic factors and the ways in which scales of contributions are influenced by changes in these factors, the role and responsibilities of FAO in relation to developing countries, the cost implications for FAO of developing its own scale of contributions and full information relating to the UN scale on which the FAO scale is presently based, and proceeded, by a process of elimination, to what appeared to be the best practical approach. The Committee noted that in the present FAO scale 1.36 percent of total contributions is borne by 68 Member Nations, each of which contributes 0.02 percent; 10.46 percent is contributed by 44 Member Nations assessed at rates varying from 0.03 to 0.99 percent; 15.13 percent is contributed by 11 Member Nations assessed at rates varying from 1.00 to 3.99 percent; 48.05 percent is borne by 7 Member Nations assessed at rates varying from 4.00 to 24.99 percent, while the remaining 25 percent is contributed by the Member Nation bearing the maximum assessment. Further, it noted that each triennial UN scale of assessments is based on the principle of the relative capacity to pay of Member States and takes into account more up-to-date information on economic and other factors than the preceding scale.
3.301 The Finance Committee also took into consideration the practices of other UN agencies and the advantages and disadvantages of each agency having its own scale of assessments and recognized that the larger organizations, including the UN, differed little in membership. It considered the problems of departing from the present standard procedure, bearing in mind that the UN operations in respect of administration, staff, salaries, etc., are to a large degree of a uniform nature. It also felt that if there was to be a major change in the principle of determining the minimum and maximum contributions this would need to be considered by the UN General Assembly.
The Summary Report
3.302 The summary report below and the supplementary information that follows is submitted to Council for transmittal to the Eighteenth Session of the Conference as a basis for consideration as to whether or not FAO's scale of contributions should continue to be derived from the prevailing scale of assessments of the United Nations.
3.303 The report first states the conclusions of the Finance Committee and then sets out the principles and criteria of assessment used by the UN Committee on Contributions (including those relating to national income) and information concerning the minimum and maximum rates of assessment. It then deals with the effects of fluctuations in exchange rates, first on the contributions assessed on Member Nations, then on the budget of the Organization.
1 C 73/REP paras 325, 326.
3.304 The report in determining factors relating to the Development of an Alternative Scale of Contributions for FAO then summarizes the practices adopted by other Agencies within the United Nations system in formulating their scales of contributions and, bearing in mind the role and responsibilities of FAO in relation to developing countries, assesses the effect and feasibility of using agricultural indicators as a component in deriving a scale of contributions for FAO and the likely additional costs to FAO of establishing its own scale of contributions. At the end of the report, as supplementary data Parts I and II, details are given of the basis of the UN scale of assessments, and of the effects of fluctuations in exchange rates on the contributions assessed on Member Nations.
Conclusions of the Finance Committee
3.305 Rule XXVII.7 (j) of the General Rules of the Organization (GRO), states that the Finance Committee shall assist the Council “to keep under review the scale of contributions and to submit recommendations to the Council regarding any modifications of such a scale.” The Committee accordingly sets out below a summary of its conclusions for consideration by the Council.
3.306 Having examined in detail the criteria on which the United Nations scale - and hence the FAO scale - is based, the Committee noted that these criteria are founded on the principle that the expenses of the United Nations should be apportioned amongst Member States broadly according to the overall capacity of each to pay. The Committee further noted that these criteria, and the methods of applying them, have been successively adjusted to take into account (i) changes in economic circumstances, including such temporary factors as special conditions in a country which affect its capacity to pay, (ii) the need to ensure as much comparability as possible in the statistical material and other data which relate to the application of the principle and on which the scales of assessment are based and (iii) changes in the membership of the UN.
3.307 In considering whether an alternative scale of contributions for FAO could be devised, the Committee examined the practices of other UN Agencies, took into account the role and responsibilities of FAO and, since most developing countries depend mainly on agriculture, considered the possibilities of using agricultural statistics as a component. It took note of the estimated costs which the Organization would incur in developing its own Scale of Contributions in the event of a decision to adopt criteria different from those applied by the United Nations.
3.308 The Committee bore in mind in particular that (i) the scales of contributions of the largest UN agencies are derived from the UN scale, or are in the process of being harmonized with it; (ii) although the scales of contributions of the smaller agencies do take into account other factors, these factors are specifically and uniquely related to the work of the particular agency in question; (iii) FAO is a broad-based agency, with functions directed to the development of agriculture, fisheries and forestry, the production, processing, trade and marketing of the resulting products, the improvement of nutritional standards, and improvements in the well-being of agricultural communities. Consequently, the Committee concluded that no single agricultural indicator would suffice as a basis for developing an alternative Scale of Contributions for the Organization. Further, although it would be possible, in a purely technical sense, to utilize a combination of several indicators to devise an alternative scale, the choice of such indicators would be highly arbitrary. Moreover, the special role and responsibilities of FAO in relation to the developing countries, and especially to those developing countries which are least able to contribute financially to the Organization, was recognized in the application of the “capacity to pay” principle applied at present.1
3.309 In the light of all these factors the Committee considered that the view expressed in Conference Resolution 42/55 that “The United Nations Committee on Contributions is the most qualified body for assessing Member Governments' ability to pay as well as all the factors entering into the computation of an equitable scale of contributions” remained equally valid in 1975. 2
1 See paras. 3.323 to 3.324.
2 C 55/REP para. 396.
3.310 The Committee concluded therefore that the FAO Scale of Contributions should in future continue to “be derived directly from the United Nations Scale of Assessments as in force during the calendar year of the Conference Session and (will) be applicable to the two following fiscal years”. 1
The UN Scale of Assessments: Criteria used by the UN Committee on Contributions
3.311 The UN Scale of Assessments, from which the FAO Scale is directly derived, is based on the principle that the expenses of the United Nations should be apportioned amongst Member States broadly according to their relative capacities to pay. The criteria which are utilized to meet this objective are decided by the General Assembly and are based on the use of systematic formulae, and other considerations together with consideration of other factors.
3.312 The basic indicator of capacity to pay is provided by comparative estimates of national income, expressed in United States dollars using appropriate exchange rates. These statistics are then modified for purposes of determining the Scale of Assessments by adjusting downward the national income of those Member States with a low per capita income, using a systematic formula which gives the greatest proportional relief to those Members with the lowest per capita income; and by making further small downward adjustments, as appropriate, in the case of the less developed of the developing countries.
3.313 The Scale of Assessments is devised to comply with explicit criteria which specify the minimum rate of assessment of Member States (currently 0.02 percent) and the ceiling rate of assessment of the highest contributor (currently, as a matter of principle, no more than 25 percent) and which are determined from time to time by the General Assembly. A further criterion, which, however, will not apply to the scale for 1977–79, specifies that in normal times the per capita contribution of any Member should not exceed the per capita contribution of the Member which bears the highest assessment.
3.314 Additionally, the UN Committee on Contributions, in developing the Scale for submission to the General Assembly, takes into account other factors in compliance with directives of the General Assembly. Specifically, these factors are the ability of individual Members to secure foreign echange, the avoidance of too drastic upward or downward shifts in individual assessment rates from one scale to the next, and the adverse effects on the capacity to pay of individual countries which submit representations to the above Committee concerning losses resulting from catastrophic natural disasters.
The Effects of Fluctuations in Exchange Rates
(a) The effects on the contributions assessed on Member Nations of FAO
3.315 The Financial Regulations of the Organization provide that a Member may pay its contribution in United States dollars, Italian lire or its own currency which must be freely convertible into lire, convertibility being the responsibility of the contributing government.
3.316 The contribution of each Member Nation to the FAO Budget is fixed in terms of dollars. It therefore follows that the amount of a Member's national currency which is required to settle its dollar obligations depends on the market rate of exchange of its national currency vis-à-vis the dollar at the time when the dollars are acquired. This market rate may be different from that which applied at the time the Conference adopted the Budget.
3.317 An equivalent situation holds true in the case of remittances made in lire, or in national currencies which are converted into lire on receipt by the Organization. In these instances, Financial Regulation 5.6 also provides that the evaluation in dollar terms of such receipts shall be “the official rate of the lire to the dollar on the first business day in January of the calendar year in which the contribution is due, or the rate in effect on the day the payment is made, whichever is the higher”.
1 C 55/REP, para. 396.
3.318 Each new UN Scale of Assessments is based upon new base-period statistics of national income, expressed in dollars, using rates of exchange which prevailed during the new base-period. Consequently, in the longer term, changes in exchange rates between national currencies and the dollar are taken into account in developing successive triennial UN Scales of Assessments.
(b) The effects on the budget of the Organization
3.319 The Report of the Thirty-Second Session of the Finance Committee contains a summary of the conclusions of the Working Group on Currency Instability established by the United Nations in December 1973.1 These conclusions do not relate to the basis of establishing the FAO or UN Scale of Contributions. The Thirty-Fifth Session of the Finance Committee (Autumn 1975) will submit recommendations arising from its study of the effects on the Organization's budget of fluctuations in the rates of the monetary unit used in the preparation of the budget.
Factors relating to the Development of an Alternative Scale of Contributions for FAO
(a) The practice of other UN Agencies
3.320 Table D below sets out, in summary form, the practices followed by the various UN agencies in developing their Scales of Contribution applicable to 1974. Of the other major agencies (ILO, Unesco and WHO) both Unesco and WHO, like FAO, derive their scales directly from the UN Scale, appropriate adjustments being made to take account of differences in membership between them and the UN. Since both the Unesco and WHO Scales applicable to 1974 were based on the UN Scale for 1971–73, neither reflected the new minimum and maximum rates of assessment of 0.02 percent and 25 percent first established in the new UN Scale for 1974–76, from which the FAO Scale for 1974–75 was derived. The new minimum of 0.02 percent was incorporated in both the Unesco and WHO Scale for 1975 with the largest contributor in Unesco being assessed at 25 percent. In WHO, a maximum assessment of 25 percent has been adopted in principle with the largest contributor being assessed 25.64 percent for 1975. This rate will be reduced towards 25 percent as new Members are admitted and as a consequence of the normal triennial increase in the percentage contributions of Member States resulting from increases in their national incomes, as reflected in the future triennial scales of assessments of the United Nations.
3.321 The scale of contributions for the remaining major agency, ILO, was originally based on that of the League of Nations. In 1968 a stage-by-stage movement of the ILO Scale towards harmonization with the UN Scale was agreed upon. It is now expected that conformity will be achieved in the ILO Scale for 1977 including the attainment of the new minimum rate of 0.02 percent. The maximum rate in ILO has been 25 percent for many years.
3.322 The scales of Contributions of the smaller agencies, while based in large measure on the United Nations Scale, or the principles involved in its determination, also take into account other factors specifically and uniquely related to the work of the particular agency in question, as shown in the table.
(b) The role and responsibilities of FAO
3.323 The Conference requested that, in examining the question of whether or not the FAO scale of contributions should continue to be derived from the prevailing scale of assessments of the United Nations, consideration should be given to the role and responsibilities of FAO in relation to developing countries.
1 CL 64/5 paras 246–248.
3.324 Clearly the major focus of the Organization will always be directed to the development of agriculture, fisheries and forestry, and to the improvement of nutritional standards in those countries most deficient in expertise and/or resources - precisely those countries least able to contribute financially to FAO's biennial budgets. Capacity to pay, however, is the basic principle used in developing the UN Scale of Assessments which, with the exceptions applying in certain of the smaller specialized agencies as noted above, has been found equitable by the Member States of the United Nations as a whole. Thus the fact that the developing countries are least able to contribute financially is recognized in the application of the capacity to pay principle.
BASIS OF 1974 SCALES OF CONTRIBUTIONS SPECIALIZED AGENCIES OF THE UNITED NATIONS
|1974 Assessment Rates|
|Maximum||Minimum||Based on UN Scale for|
|Basis of Scale||Percent|
|Derived directly from UN Scale|
|UN Scale adjusted for differences in membership.||25.00||0.02||1974–76|
|UN Scale adjusted for differences in membership. The new minimum and maximum rates of 0.02% and 25.00% respectively were incorporated in 1975 Scale.||29.41||0.04||1971–73|
|UN Scale adjusted for differences in membership. New minimum rate of 0.02% incorporated in 1975 Scale with maximum assessment included at 25.64%. In future, assessments of new members as well as increased assessment rates of other members attributable to triennial increases in national incomes will be applied to reduce maximum rate to 25%.||29.18||0.04||1971–73|
|Originally based on League of Nations Scale. Gradual harmonization to conform with UN Scale (adjusted for differences in membership) expected to be completed by 1977.||25.00||0.05||1971–73|
|Derived from UN Scale plus other factors or entirely other factors|
|“Non-safeguard” component of budget (approx. 82%) at base rates derived from UN Scale, adjusted for differences in membership. “Safeguards” component (approx. 18%) distributed so as to relieve developing Member States from some of the safeguards expenses relating to the impact of the Nuclear Non-Proliferation Treaty on the Agency's budget||31.90825||0.03637||1971–73|
|(for “base rates”)|
|Based primarily on importance of civil aviation in national economies measured by ton-kilometer capacity. Certain data provided by UN Committee on Contributions also used to develop scale.||28.75||0.10||-|
|Scale comprised of two elements:|
|i)||Basic assessment based on UN Scale subdivided into 3 groups:|
|a) less than 2 % - $2 000|
|b) 2% to less than 10% = $4 000|
|c) 10% and over = $10 000|
|ii)||Additional assessment based on 1 share per 1 000 gross register tons as shown in latest edition Lloyds Register.||16.55||0.07||1974–76|
|(minimum theoretical contribution $2 000; no maximum)||(for basic assessment)|
|Based on “unit class” ranging from 1/2 to 30 units, according to|
|class of contribution each Member has chosen to pay.||7.22||0.12||-|
|(30 units)||(1/2 unit)|
|Based on “unit class” ranging from 1 to 25 units, according to class|
|of contribution each Member has chosen to pay.||2.48||0.10||-|
|(25 units)||(1 unit)|
|a)||50 % data provided by UN Committee on Contributions, and|
|b)||50% other factors relating to|
|i) use of meteorology in national economy|
|ii) size of meteorological service|
|iii) contribution paid to IMO which ceased to exist on creation of WMO.||23.48||0.09||1974–76|
(re point a)
(c) The implications of using agricultural statistics in deriving a scale of assessments
3.325 Whereas the UN Scale of Assessments, and hence the FAO Scale, is based on the principle of the overall capacity to pay of Member States, irrespective of the sectoral composition of their economies, the scales of certain of the smaller agencies take into account factors which relate specifically to the work of those agencies, as has been noted. As a basis for consideration by Conference of whether or not FAO's scale of contributions should continue to be derived from the UN scale, an examination was therefore made of the implications of using statistics which reflect the importance of food and agriculture in national economies in constructing a scale of contributions for the Organization.
3.326 Many indicators exist for measuring the importance of particular aspects of food and agricultural economies, but only two indicators may be considered as sufficiently broad to represent, either directly or indirectly, the greater part of the Organization's activities, namely, the contribution of agricultural production to gross domestic product (GDP) and the importance of expenditure on food and other agricultural products in total national income.
3.327 However, the use of either of these broader indicators would involve a high degree of arbitrary judgement as to the weights to be attached to them in devising a scale of contributions. Secondly, the detailed up-to-date statistical information which would be necessary is not available for most countries and the task of converting national data to a common currency would pose substantial difficulties in view of the varied structure of pricing arrangements within agricultural sectors.
(d) The costs to FAO of establishing its own scale of contributions
3.328 It was estimated that, if FAO were to establish its own Committee on Contributions and Statistical Unit but continued to receive basic national accounts data in US dollars from the United Nations Statistical Office, the costs (based on 1974 prices), including travel and subsistence allowance, as well as the cost of the immediate Secretariat to the Committee, would amount to approximately $90 000 for a biennium.
Supplementary Data Part I: Basis of the UN Scale of Assessments 1
3.329 The principles and criteria presently employed by the UN Committee on Contributions in developing the UN Scale of Assessments recommended to the General Assembly, are set out in the Committee's original terms of reference adopted in 1946 and in directives given to the Committee from time to time by the General Assembly.
3.330 Under those original terms of reference, the basic principle was established that the expenses of the United Nations should be apportioned amongst Member States broadly according to their relative capacities to pay. For this purpose, the following criteria, which were recommended at that time, are currently used as a basis for formulating the Scale:
(i) comparative estimates of national income was recommended as the fairest guide but, to prevent anomalous assessments resulting from the use of this criterion, it was further recommended that:
(ii) comparative income per head of population and
(iii) the ability of Members to secure foreign exchange should also be taken into account.
A fourth criterion, no longer applied, was that temporary dislocation of national economies arising out of the Second World War also be taken into account.
Comparative estimates of national income
3.331 In the application of these criteria, national accounts data are prepared by the UN Statistical Office for the Committee's consideration at the time of its triennial review of the scale. The basic data, comprising total national income and per capita national income, are for the most part provided by the Governments concerned or, where necessary, estimated by the UN Statistical Office in national currencies and then expressed in United States dollars for comparative purposes using appropriate exchange rates. In arriving at these comparative estimates of national income, the Committee seeks to ensure that countries showing inordinately large movements in relative prices, not proportionately reflected in the rates of exchange, are not over assessed or under assessed purely as a result of such relative price movements. For the Scale at present in use (1974–76) all of the basic data used refer to the period 1969–71.
3.332 Since 1964, net national product (NNP) at market prices (equal to net national income at market prices) has served as the basic criterion ((i) above) of “Capacity to pay” in preference to other measures, such as gross national product (GNP), so as to ensure as much comparability as possible between data for those Members using the Material Product System of national accounts and data for Members using the UN System of National Accounts which includes non-material products.
3.333 For countries using the UN System of National Accounts, NNP is defined as GNP less provisions for the consumption of fixed capital. These provisions cover the current value of wear and tear and foreseen obsolescence of all fixed capital as well as accidental damage to it. It is unofficially estimated by FAO that the GNP of developed countries with market economies was on average about 10 percent higher than their NNP in 1970, compared with about 6 percent in developing market economies, but the ratio of GNP to NNP varies widely between countries in each of these groups.
1 Based on the Report of the UN Committee on Contributions to the 28th Session of the General Assembly; General Assembly, Official Records: Twenty-Eighth Session, Supplement No. 11 (A/9011).
Comparative income per head of population
3.334 The estimates of total national income made in the above way are then modified, to take into account criterion (ii) above through the application of a systematic low per capita income formula. In devising the Scale for 1974–76, the estimates of the national income were adjusted downwards for the purpose of assessment in the case of those Member States with per capita incomes below $1,500 in such a way as to give the greatest proportional adjustment to those countries with the lowest per capita incomes, with a maximum downward adjustment of 60 percent.
3.335 The present formula was devised in response to directives given to the Committee by the General Assembly to adjust the low per capita income allowance formula to the changing world economic conditions and to give due attention to the developing countries in view of their special economic and financial problems (General Assembly Resolution 2961 C (XXVII)). In previous scales the formula has been applied to countries with a per capita income of less than $ 1,000 and the maximum adjustment has been 50 percent.
3.336 The example below illustrates the actual national income and the adjusted national income, used for the purpose of assessment, for a hypothetical country, with a total population of 10 millions, at different levels of per capita income (using the present formula):
|Per capita income||Actual|
|$||($ million)||($ million)||(percent)|
|250||2 500||1 250||50|
|500||5 000||3 000||40|
|750||7 500||5 250||30|
|1 000||10 000||8 000||20|
|1 250||12 500||11 250||10|
|1 500||15 000||15 000||0|
3.337 Further small downward adjustments are made as appropriate, in the case of the less developed of the developing countries, bearing in mind the basic principle of “capacity to pay” and the request of the General Assembly to the Committee on Contributions to give additional attention to these countries in the granting of relief. 1 In practice, although no systematic formula is applied in determining these further downward adjustments, the new low per capita income formula referred to above has reduced the need for such adjustments.
1 Official Records of the General Assembly, Twenty-seventh Session. Annexes, agenda item 77, doc. A/8952, para. 13.
3.338 Also in connection with the application of criterion (ii) above, and in accordance with explicit criteria given to the Committee on Contributions by the General Assembly, the present UN Scale of Assessments is designed to ensure.
(iv) a minimum rate of assessment of 0.02 percent (General Assembly Resolution 2961 D (XXVII));
(v) a ceiling rate of assessment of the highest contributor which, as a matter of principle, should not exceed 25 percent of the total (General Assembly Resolution 2961 B (XXVII)); and
(vi) a per capita ceiling to contributions such that in normal times the per capita contribution of any Member should not exceed the per capita contribution of the Member which bears the highest assessment 1 (General Assembly Resolution 238 A (III)). 2
3.339 The scale of assessments derived from the comparative estimates of national income, after taking into account the criteria relating to per capita income and the ceiling and minimum rates of assessment, additionally takes into consideration other factors. These factors are the ability of individual Members to secure foreign exchange (criterion (iii) above), the avoidance of too drastic upward or downward shifts in individual Members' assessments from one triennial scale to the next, and the adverse effects on the capacity to pay of individual countries which submit representations to the Committee concerning losses sustained as a result of catastrophic natural disasters.
3.340 In the absence of systematic formulae, the Committee on Contributions uses its judgement to make adjustments in individual rates of assessment after special scrutiny of the basic statistical data. These data include the proportion of foreign earnings devoted to the servicing of foreign debts in applying criterion (iii) above and statistical and economic data submitted by individual Governments on the magnitude of damage caused by natural disasters in their countries.
Supplementary Data Part II: The Effects of Fluctuations in Exchange Rates on the Contributions Assessed on Member Nations
3.341 Financial Regulation 5.6 of the Organization provides that a Member may pay its contribution in US dollars, Italian lire or its own currency which must be freely convertible into lire, convertibility being the responsibility of the contributing government. As to payments received by the Organization in lire, or received in national currencies which are then converted into lire, Financial Regulation 5.6 also provides that the applicable rate of exchange for purposes of evaluation of such remittances shall be the official rate of the lire to the dollar on the first business day in January of the calendar year in which the contribution is due, or the rate in effect on the day payment is made, whichever is the higher.
3.342 If a Member utilizes its national currency to acquire US dollars in settlement of its dollar obligation, it is apparent that if national currency has strengthened against the dollar since the date of adoption of the Budget by the Conference, then a lesser amount of national currency would be required to settle the established dollar amount due than would have been the case if payment had been effected on the date of the Conference determination of the Budget level and the applicable Scale of Contributions. (At the moment the contribution payable by each Member Nation for the ensuing biennium is fixed in terms of dollars). The opposite, of course, holds true in the event that the national currency concerned has weakened against the dollar.
3.343 All else being equal, the same holds true for remittances made in lire when such lire have been acquired by a Member Nation through conversion of national currency as well as for remittances made in national currency which, on receipt, is converted into lire by the Organization for the Member's account.
1 In the UN Scale for 1974–76 three of the Member States whose per capita contributions
would have been reduced by the application of this criterion, waived this provision and
thus were assessed as if the criterion did not exist.
2 This per capita ceiling principle has been abolished commencing with the scale for 1977–79 triennium (General Assembly Resolution 3228 (XXIX) of 12 November 1974).
3.344 In the case of the former type of remittance, it will be recognized that depending on how the Member Nation issues its payment instructions there may be a time lag between the date on which the Member acquires lire and the date such lire arereceived by the Organization. Hence differences in the applicable exchange rate could arise in the intervening period due to market forces, etc.
3.345 Other differences could arise due to the Member Nation having acquired lire in financial markets outside Italy whereas the Organization in evaluating contributions paid in lire uses the “official” Italian lira rate as required under Financial Regulation 5.6, being the average of the closing rates on the Rome and Milan Exchanges. One cause of such differences is that the rates prevailing in two different markets are seldom exactly the same at any given time and in any event the closing Italian rates are used for establishing the “official” rate whereas the rate can fluctuate widely (and recently has done so) within a day. Another is that markets outside Italy are not necessarily open concurrently with the Rome/Milan Exchanges and thus are subject to different news and market conditions. The impact of time lag can also arise in the case of remittance of national currency for conversion by the Organization into lire.
3.346 Finally, and in connection with either type of remittance involving lire, the evaluation in dollar terms of such receipts (and hence the determination of whether an additional dollar amount remains due or is refundable) may be affected by the provision of Financial Regulation 5.6 that the higher of the official lira rate on the first business day of the year to which the payment relates or the rate on the date of payment shall be used.
Longer term implications
3.347 The FAO Scale of Contributions for 1974–75 was derived directly from the UN Scale of Assessments for 1974–76. The UN Scale itself was based on national accounts data for Member States covering the years 1969–71, net national product figures being translated for comparative purposes into US dollars at rates of exchange as approved by the UN Committee on Contributions, appropriate to those years.
3.348 It follows that the UN Scale for 1977–79 will probably be based on national statistics for the years 1972–74 and that the exchange rates to be adopted by the UN Committee on Contributions for conversion purposes will be those appropriate to the latter period.
3.349 It can be seen, therefore, that although a time lag is involved, the UN Scale of Assessments does take into account relative changes in exchange rates. Thus for example, if the national currency of an individual Nation strengthened threefold on average against the dollar between the two periods (while other exchange rates remained constant, and all else being equal, and given the assumption that the UN Committee on Contributions concluded that it was appropriate to reflect such increase in the exchange rate to be used for conversion purposes), it would appear that the UN assessment rate for that Member would be increased threefold, while the rates of other Members, excluding the minimum and maximum rates, would be decreased in order to maintain a total Scale of 100 percent. This, of course, excludes the impact of the formula for the relief of countries with low per capita incomes.
3.350 An example of the other extreme can be illustrated on the premise that the appropriate exchange rates for all Members change in the same direction and with the same intensity vis-à-vis the US dollar, all else remaining equal. Assuming that the rate of the maximum contributor were carried forward into the new Scale at 25 percent, then it would appear that the rates of other Members would similarly remain unchanged in order to maintain a total of 100 percent. Here, again, this excludes the impact of the formula for the relief of countries with low per capita income.
3.351 The foregoing examples further assume that the net national product figures in terms of national currencies also remain constant for all Members.
3.352 In between these two extremes it is possible that even though the national currency of a Member strengthens against the dollar, it would be called upon to contribute at a lower rate in the ensuing Scale if the impact of its revaluation on its relative weight in the Scale were more than offset by revaluations of other Members relative to their weights in the Scale.
3.353 From the foregoing it can be seen that the impact of an exchange rate change for a particular Member, is over the longer term, dependent on relative changes affecting other Members.
3.354 It should also be pointed out that the above presentation does not, and cannot, take into account special considerations given by the UN Committee on Contributions such as, for example, any steps taken to ensure that too drastic changes in the rates of individual Members are not made. Nor can it take into account the downward adjustments made on an ad hoc basis by the UN Committee in the rates of assessment of those countries facing difficulties as a consequence of natural disaster, or of balance of payments considerations.