Portugal’s €332M State Arrears Strain Suppliers and Threaten EU Penalties

The Portugal Budget Authority has confirmed that overdue payments by public bodies climbed to €332.3 M in 2025, prolonging cash-flow headaches for thousands of suppliers and nudging Lisbon closer to EU penalty territory.

Why This Matters

• €37.4 M jump since 2024 signals that the public sector is paying even later just as financing costs rise.

• Health units alone added €47.3 M in arrears; hospitals now take an average of 73 days to settle a bill.

• Brussels has given Portugal two months to meet the 30-day rule or face fines from the Court of Justice of the EU.

• New rules under Decree-Law 13-A/2025 force every ministry and state-owned firm to publish unpaid invoices older than 30 days.

Anatomy of the Delay Problem

Late payments are nothing new, but 2025 delivered a sharp reversal after two years of gradual improvement. According to the latest Síntese de Execução Orçamental, the backlog grew by 13% year-on-year. The surge was driven primarily by hospital trusts (EPEs) and reclassified public entities (EPRs), which together added €65 M in fresh arrears. By contrast, regional administrations trimmed outstanding bills by €30.6 M, a rare bright spot.

Where the Bottlenecks Are

• Hospitals: Procurement directors cite inflation in medical supplies and delayed central-government transfers as reasons why some invoices now wait three months for approval.

• EPRs: Agencies recently re-entered in the state perimeter must shift from commercial credit lines to Treasury funding, creating a paperwork logjam.

• IT platforms: Suppliers complain that the mandatory e-invoice portal still rejects 1 in 12 submissions, forcing manual re-entry and resetting the payment clock.

Government’s Latest Fixes

Lisbon is trying to avert an EU infringement case by tightening oversight:

Decree-Law 13-A/2025 obliges any entity with an average payment period above 60 days to list its debts quarterly on its website.

The Directorate-General for Budget, Local Government Directorate, and UTAM must publish a consolidated ranking of the slowest payers.

All new public contracts must contain clear due-date clauses and penalties for delay, mirroring private-sector standards.

In December, the Finance Ministry injected €806 M—€600 M in equity and **€206 M in programme top-ups—into hospital trusts to clear old invoices before year-end.

Impact on Suppliers & Households

Small and medium-sized firms—especially those selling consumables and facility services—report that 74% saw client liquidity deteriorate in 2025. Longer waits for public money ripple outward:

• Payroll stress: Owners often bridge gaps with overdrafts priced at 6-8 %, eroding margins.

• Investment freezes: A quarter of SMEs postponed equipment upgrades, citing uncertainty over when the state will pay.

• Family finances: When suppliers tap personal guarantees to secure bank lines, household debt levels rise, exposing families to Euribor volatility.

What This Means for Residents

For anyone living or doing business in Portugal, the mounting arrears translate into very practical realities:

• Expect longer lead times or reduced service quality from hospital and municipal contractors juggling cash-flow gaps.

• If you supply the state, build a 90-day liquidity cushion and monitor the quarterly debtor lists now required by law.

• Taxpayers could ultimately shoulder EU fines if Lisbon misses the payment-deadline directive—money that would otherwise fund schools or transport.

• Consumers may see prices creep up as private suppliers pass on the cost of credit embedded in delayed invoices.

The European Angle

Brussels’ Late Payment Directive mandates that public authorities settle invoices within 30 days (60 days for healthcare). With Portugal averaging 73 days, the European Commission has started formal proceedings. Analysts at BBVA Research reckon potential fines could reach 0.2 % of GDP if no corrective trajectory is shown by spring 2026. Spain, once a serial offender, cut its average to 49 days after adopting digital approval chains—evidence that reform can pay off.

Outlook for 2026

The Finance Ministry insists the December cash injection will lop €400 M off health-sector debts by mid-year. Yet structural fixes—standardised e-invoicing, faster Treasury disbursements, and stricter contract enforcement—remain only partially implemented. Suppliers and credit-insurers therefore expect the payment timer to stay above EU limits for most of 2026, keeping political and economic pressure squarely on Lisbon.