Court awards, compensations push up govt domestic arrears 

Government registered unprecedented increases in court awards, compensations, and unpaid utility bills, pushing up domestic arrears by Shs310.3b for the financial year ended June 2023. 

In details contained in the Public Debt and Other Financial Liabilities Management Framework 2023/28, the Ministry of Finance noted that the accumulation of domestic arrears continues to present economic risks affecting the well-being of pensioners and employees, private businesses, whose financial stability is compromised, increase government’s operational costs and impact effective execution of the budget. 

“Addressing domestic arrears has been an ongoing challenge … arrears have increased under each expenditure category; the key areas being court awards, pensions, salaries, general goods, services, and development expenditure,” the Framework, which highlights management of debt and other liabilities, reads in part. 

The Framework noted that as of June 2023 domestic arrears, excluding those incurred by local governments, had increased to Shs2.7 trillion from Shs2.4, of which Shs892.9b and Shs742.6b was due to recurrent and development expenditures, respectively.

However, the Shs2.7 trillion was a reduction from the Shs4 trillion accumulated in the period ended June 2019 due to concerted efforts to reduce domestic arrears under recurrent expenditures, which fell in the period by Shs85.9b from Shs978.86 in June 2022.  

Other reductions were registered under contributions to international organisations from Shs26.57b to Shs16.44b and taxes and deductions from Shs87.93b to Shs54.79b. 

However, increases were registered in compensations, court awards, pension and gratuity, utility bills, and rent. 

For instance, the Framework noted, that compensations and court awards more than doubled from Shs1134.2b to Shs334.7b and from 31.2b to Shs279.57b, respectively, while arrears under pension and gratuity more than doubled from Shs68.77b to Shs249.88b.

However, the Ministry of Finance did not explain the increases and efforts to get a comment were futile by press. 

Phone calls to different Ministry of Finance officials went unanswered at the weekend. 

Other increases in domestic arrears were registered in utilities including electricity, water and telephone, which rose from Shs70.54b to Shs103.16b, while rent arrears more than tripled from just Shs5.65b to 39.94b.

Accumulation of domestic arrears remains a key challenge, which government says that, unlike other types of debt, they carry significant economic risks to private sector business stability and the economy at large. 

Therefore, the Ministry of Finance noted that considering the unprecedented levels, it had, under the new Public Debt and Other Financial Liabilities Management Framework 2023/28, outlined proactive and corrective measures to eliminate existing arrears and maintain future arrears within sustainable levels. 

The measures, which would be implemented in the next five years to 2028, would include the provision of an average of Shs450b every financial year to clear existing arrears, focus on payment of pensions and salaries due to their impact on poverty reduction, and prioritise utility payment to mitigate risks to essential public service delivery. 

Other measures would include preventing the diversion of budgeted arrears resources, conducting a comprehensive domestic arrears stocktaking and verification to establish a single database with key information for each arrear claim, and expanding the arrears budget allocation to show age, with a breakdown by subcategory. 

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