Guinea-Bissau: A Model for Fiscal Transparency through Blockchain Technology
Guinea-Bissau has launched a groundbreaking blockchain platform to improve the management of its public wage bill, supported by the IMF and Ernst & Young. This initiative enhances transparency and accountability within government operations by providing a secure and immutable ledger for payroll data. The project aims to reduce the high wage bill ratio relative to tax revenues and expand its effectiveness across various ministries, marking a significant step towards better governance in the region.
Guinea-Bissau, a West African nation, is setting a path toward enhanced fiscal transparency by integrating blockchain technology into its management of public sector wages. In May 2024, the country launched a pioneering blockchain platform as part of its program with the International Monetary Fund (IMF) under the Extended Credit Facility (ECF). This initiative emerges from a four-year collaborative effort with the IMF and technological advisor Ernst & Young, aided by specific financial partners. The blockchain platform aims to transform how the country oversees its public wage expenditures, marking a significant milestone in governance and financial management, particularly notable in the African context. The blockchain platform functions as a secure digital ledger, facilitating the tracking of public service wage data. According to Concha Verdugo Yepes, the project lead, this platform enhances salary and pension management by allowing almost real-time monitoring of eligibility, budgeting, and the disbursement process. Its design ensures improved data integrity and supports the production of accurate and timely fiscal reports for policymakers and the broader public. The platform’s reliance on blockchain technology guarantees that information is immutable and secure, allowing for effective detection of inconsistencies in salary data. The integration of this technological solution is a response to the initial challenge in Guinea-Bissau, where the wage bill constituted a staggering 84 percent of tax revenues as of 2020—one of the highest rates in the region. This figure has since improved to 50 percent, although it remains above the fiscal targets set by the West African Economic and Monetary Union (WAEMU). The new system is poised not only to enhance fiscal governance but also to reduce the perception of corruption and foster increased accountability within public institutions. Looking ahead, the project intends to expand its reach as the blockchain team plans to include additional ministries, with a target of covering the financial management of all public officials and pensioners by November 2024. This initiative is expected to bolster transparency in public wage management, ensuring that all public service hires and related payments comply with regulatory standards. The ongoing commitment from the IMF and its partners reflects a unified aim to improve governance and promote sustainable development in Guinea-Bissau. Therefore, Guinea-Bissau’s foray into blockchain technology signals a commitment to transparent and efficient public financial management, reinforcing the crucial role of innovation and collaboration in addressing governance challenges.
The article discusses Guinea-Bissau’s adoption of blockchain technology to enhance transparency and fiscal management in its public sector. About four years in collaboration with the IMF has culminated in the launch of a blockchain platform aimed at critical wage bill oversight. This development is particularly significant for Guinea-Bissau as it navigates high wage expenditure ratios compared to tax revenues. It underscores broader initiatives for improving governance and efficient resource utilization in a region where such innovation in governance is still nascent.
In summary, Guinea-Bissau’s implementation of a blockchain platform for public wage management serves as a pioneering model in Africa for enhancing fiscal transparency and efficiency. The significant reduction in the wage bill as a percentage of tax revenues and the ongoing expansion of this technology to more public sectors indicate a proactive approach to governance reforms. This initiative illustrates the importance of innovative solutions in addressing longstanding administrative challenges and reflects a broader commitment to economic stability and accountability in public service delivery.
Original Source: www.imf.org
