Government set aside Shs317 billion in the 2026/27 financial year to settle domestic arrears, as part of a medium-term strategy to eliminate unpaid obligations owed to suppliers, contractors and other service providers.
The allocation, contained in the Budget Execution Circular for the financial year, is intended to reduce the stock of verified domestic arrears and improve government’s payment discipline.
Under the strategy, payments will be prioritised based on categories, starting with domestic suppliers of goods and services, followed by statutory expenses.
Other priority categories include contractors for works, transport, energy, water and classified services; taxes and statutory deductions; utilities; and compensation claims administered by the Uganda Land Commission, Ministry of Lands, Housing and Urban Development, and the Ministry of Justice and Constitutional Affairs.
The government says settlement of arrears will be guided by the stock of liabilities verified by the Office of the Auditor General, meaning payments will be made against confirmed government obligations.
The move is expected to provide relief to businesses and contractors that have supplied goods and services to government but are still awaiting payment, while also easing pressure on companies that have had to finance public contracts before receiving their dues.
At the same time, government is tightening accountability for Accounting Officers to prevent the accumulation of new arrears.
Accounting Officers who continue to accrue domestic arrears will face sanctions, including non-renewal of their contracts as Accounting Officers.
Non-compliant Accounting Officers will also be barred from entering into new contracts without prior confirmation that resources are available to finance them. They may further be held personally liable for causing domestic arrears.
The measures are part of government’s broader effort to strengthen budget execution, ensure that commitments are matched with available resources and prevent the accumulation of unpaid bills that can disrupt businesses and government service delivery.
The Shs317 billion allocation therefore signals a renewed push by government to clear verified arrears while ensuring that new unpaid obligations are not allowed to accumulate.
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