The Marshall Islands has indefinitely halted government spending from its "general fund".
The governing administration is already facing two delinquent loan payment notices from the Asian Development Bank.
Underscoring the government's current cash-flow problems, the state-owned telecommunications company cut virtually all government phone lines last week for lack of payment.
They were only restored after a 40,000 U.S. dollar payment was made.
The government's secretary of finance, Jefferson Barton, said he hoped the cash flow problems would be resolved by the end of February.
He said the government was not bankrupt.
But, Mr Barton said that projected tax collections were not keeping pace with spending, forcing the freeze on general fund spending.