Domestic arrears now at Shs4 trillion

Wednesday April 14 2021

Central government arrears grew by over 13% in the 2019/20 financial year. PHOTO/COURTESY


Central and local government domestic arrears now stand at Shs4.144 trillion, according to Ministry of Finance.
Whereas there was a reduction in local government domestic arrears, central government arrears grew by 13.2 per cent, according to a report prepared for Parliament by the Ministry of finance.
However, there was a marked reduction of close to 53 per cent of local government arrears, indicating an improvement in handling of debt due to suppliers and service providers.
The report indicates that central government arrears grew to Shs4.113 trillion in the 2019/20 financial year, representing a growth of 13.4 per cent in the period.
The growth came despite government efforts to lower money due to suppliers and creditors, among others.
During the period, according to a report, the Finance Ministry said, central government domestic arrears had by June 30 grown from Shs3.7 trillion in the 2018/19 financial year to Shs4.113 trillion, accounting for the biggest part of unpaid money (99 per cent).
However, the report noted that despite the increase, a reduction in central government arrears of all categories, apart from others and taxes and other deductions, was observed.
Local government arrears during the period declined to Shs31.27b compared to Shs65.9b in the 2018/19 financial year.  The report also noted a fall in projected revenue from 4.9 per cent in the 2018/19 financial year to 7.5 per cent of gross domestic, before falling further to 8.6 per cent by the end of the 2020/21 financial year.
“Prioritisation of improvement of infrastructure as a means to unlock its potential, enhance productive capacity and increase competitiveness has led to implementation of a number of key infrastructure projects, which cannot all be fully financed from domestic revenues,” the Ministry of Finance, said, noting that government has had to borrow to finance the projects leading to a buildup in public debt in recent years.
Experts have warned about the increasing risk to debt sustainability with at least 55 per cent of collected revenues going into debt servicing, which has created liquidity scarcity.
Externally financed projects are expected to cost Shs9.515 trillion during the 2020/21 financial year but will reduce to Shs8.4 trillion by the 2025/26 financial year.

External financing      
Externally financed projects, according to Ministry of Finance are expected to cost Shs9.5 trillion during the 2020/21 financial year but will reduce to Shs8.365 trillion by the 2025/26 financial year.