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.
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