The Marshall Islands Social Security Department says the government has repaid its debts of one million US dollars owed to it.
The government made only two payments in the first quarter of this year and missed its two pay dates in April.
This prompted the Bank Of Marshall Islands to temporarily stop issuing loans to government workers because of the high risk of not being able to collect loan payments.
But the chief financial officer of the Social Security Department, Alice Sanchez, says the matter has been resolved.
"We brought it out to the board. And the board had a meeting with the Secretary of Finance. They made a settlement on that and after that meeting it was settled until last Friday. So they are now current on their debts to social security. This problem has been resolved."
Ms Sanchez says she is not sure why the government did not pay its bills in time.
But she says the department will make sure that the board is informed immediately in case it happens again.
The move did not affect retirees in the Marshalls.