Guinea-Bissau uses blockchain to strengthen budget transparency
October 2, 2024
To better manage the public sector payroll, Guinea-Bissau has adopted blockchain technology, a secure digital mechanism that tracks and reports salary expenditures of civil servants.
Guinea-Bissau, a small country located on the coast of West Africa, has taken a leap into the future. In May 2024, the country successfully launched a blockchain platform – as part of the country’s program with the IMF, under the Extended Credit Facility (ECF) – designed to revolutionize public payroll management. After four years of collaboration with the Fund and technology advisor Ernst & Young, and with financial support from selected partners, Guinea-Bissau is moving forward with the implementation of this new technology. This initiative, one of the first of its kind in Africa, marks an important step towards better governance and better transparency of public finances. This underlines the country’s commitment to addressing governance challenges and improving public service delivery.
In an interview, IMF Country Focus spoke with the head of the mission in Guinea-Bissau José Gijón and blockchain project manager Concha Verdugo Yepes on this innovative tool.
What is the new blockchain platform in Guinea-Bissau?
Verdugo Yepes: The platform offers a secure and transparent digital ledger for managing public sector payroll data, enabling near real-time tracking of salary and pension eligibility, budgeting, payment approvals and disbursements of salaries and pensions. It significantly improves data integrity and supports the production of accurate and timely financial reports for use by policymakers and the public. It is one of the first platforms in sub-Saharan Africa to use blockchain technology to improve government operations, particularly in salary and pension management.
In practice, the platform works using blockchain technology, which is a virtual ledger. This ledger stores and exchanges information securely in a way that cannot be altered. Each transaction is recorded in near real time on a tamper-proof register. The blockchain solution identifies discrepancies and triggers alerts in the event of inconsistent salary information. It also reduces the burden of audit reporting and reconciliation and provides reliable, timely and high-quality data to artificial intelligence (AI) models.
Although the solution is not currently integrated with AI models, it has the data needed to train predictive AI models to predict key information for decision making, such as estimating unjustified or improper payments. addressed. The advent of generative AI could lead to further advancements in the future related to data analysis and other areas.
How does the platform benefit Guinea-Bissau and its citizens?
Gijon: The support of the program by the FEC and the blockchain solution play a crucial role in improving the fiscal and economic stability of Guinea-Bissau.
When project design began in 2020, the total payroll was equivalent to 84% of tax revenue, the highest ratio in the region. In other words, for every hundred dollars collected in taxes, eighty-four dollars were spent on wages. This ratio has now fallen to 50 percent – a considerable improvement, but still high compared to the West African Economic and Monetary Union’s (WAEMU) regional fiscal convergence criteria, under which salaries do not exceed 35 percent of tax revenue. This blockchain solution aligns with the country’s policy priorities of improving fiscal transparency and governance, in line with the IMF-supported agenda.
More broadly, the initiative will help increase accountability and reduce any perception of public corruption, thereby helping to build trust in fiscal institutions. By improving and automating payroll management, it will make government operations more efficient. And by identifying inconsistencies in salary information, it will trigger alerts for potential fraud.
What lies ahead for Guinea-Bissau’s blockchain initiative?
Verdugo Yes: The blockchain team has already started expanding the project to include other ministries and agencies in Guinea-Bissau. By November 2024, the digital platform could potentially track information from all 26,600 public employees and 8,100 retirees. The main objectives of the project for the future are to continue to improve the transparency of payroll management, ensuring that civil servants will only be hired if they are eligible to do so in accordance with Guinea-Bissau’s regulatory framework , that payroll payments will all be made. properly budgeted and approved, and payments to public officials will be tracked.
The Fund and its partners remain committed to supporting Guinea-Bissau as it expands this technology to other ministries. This ongoing collaboration highlights the common goal of improving governance and fostering sustainable economic development in the region. The story of Guinea-Bissau is not just a story of technological progress, but a testimony to the power of collaboration, resilience and visioning a better future.
