Govt, private sector discuss payment of domestic arrears

Thursday April 9 2020

Domestic arrears: Government at least holds

Domestic arrears: Government at least holds about Shs3.7 trillion in domestic arrears. PHOTO BY EDAR R BATTE  

By Ashita Chopra

The business community, under Private Sector Foundation Uganda (PSFU) and government are discussing the possibility of clearing domestic arrears as a way of liquidating businesses that are already struggling to shake off effects of Covid-19.

In details seen by Daily Monitor, the Finance Ministry and PSFU have, among other issues agreed that clearing domestic arrears should be considered as one of government’s urgent businesses.

This, according to details, will help businesses that are already struggling with cash-flow issues, to reset their operations and help others to offset pending obligations.
Mr Jim Mugenga, the Ministry of Finance spokesman, yesterday did not deny or confirm the ongoing discussions but told Daily Monitor that government, as a matter of policy, had over the last couple of years been ensuring an enhanced approach to settling domestic arrears, noting more funds had been committed to this and actually paid out.

However, he said, the Finance Ministry Permanent Secretary and Secretary to the Treasury had instructed all government ministries, departments and agencies to ensure that they secure budget allocations for services and commitments before they make them.

“In this way,” he said: “Our target is to ultimately reduce domestic arrears and enforce budget discipline.”

Earlier, Mr Gideon Badagawa, the PSFU executive director, had told Daily Monitor that they had had a meeting with the Ministry of Finance, in which government had agreed to pay domestic arrears, especially in the manufacturing and agro-processing.


“We are in the process of listing companies supplying government, especially those in productive sectors such as agro-processing, agriculture and manufacturing. Some of these government has agreed be paid with the view of easing their cash flow,” he said.

Part of the list, which Daily Monitor has seen, is composed of companies such as Roofings, whose arrears stand at about Shs23.7b.

So far, the list, which is composed of about 10 companies, indicates arrears of about Shs120b.
However, PSFU is yet to exhaust the list of companies, which have a combined sum of Shs3.7 trillion held by government in domestic arrears. In the 2019/20 financial year, government allocated about Shs450b to clear domestic arrears, the same amount that has been allocated in the 2020/21 financial year.

It is not yet clear if this figure will be adjusted in the face of ongoing discussions.

Mr Badagawa yesterday said there are companies that have not been paid in over three years, noting these will take priority.

He also noted that the measures being discussed focus on businesses that have already been affected by Covid-19 and those that are likely to feel the after effects.

Incentives: Government to work on incentives for producers of medical and food products.
Domestic Arrears: List of companies with outstanding payments to be provided by PSFU.
Standards: Government to consider increasing funding to UNBS to ensure standards.
Tourism: Government to defer VAT on upcountry hotels.
UDB: Government to recapitalise UDB to allow onward lending.
NSSF Bill: Private Sector to lobby to get bills such as the NSSF Bill out of Parliament
Re-aligning budget: Government to re-align the budget and push more resources to production.
Floriculture and horticulture: VAT refunds to be made.
ACF: Finance Ministry to increase funding to Agriculture Credit Facility.
The Export Guarantee Scheme: To be studied further to make it more marketable.
Easing exports: Finance Ministry agreed to push the proposal to merge Uganda Air Cargo with Uganda Airlines to enable business use the cargo for export purposes.