Guinea-Bissau is Using Blockchain to Boost Fiscal Transparency

Guinea-Bissau, a small nation on the coast of West Africa, has made a quantum 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 its public wage bill management. Following four years collaborating with the Fund and technological advisor Ernst & Young, and with financial support from selected partners, Guinea-Bissau is moving ahead with implementing this new technology. This initiative, one of the first of its type for Africa, marks a significant leap toward better governance and transparency in government finances. It underscores the country’s commitment to tackling governance challenges and enhancing public service delivery.

In an interview, IMF Country Focus spoke with Guinea-Bissau mission chief Jose Gijon and blockchain project lead Concha Verdugo Yepes about this innovative tool.

What is Guinea-Bissau’s new blockchain platform? 

Verdugo Yepes: The platform offers a secure, transparent digital ledger for managing the public service’s wage bill data, enabling almost real-time monitoring of salary and pensions eligibility, budgeting, payment approvals, and salary and pensions disbursements. It significantly improves data integrity and supports the production of timely and accurate fiscal reports for use by policymakers and the public. It’s one of the first platforms in sub-Saharan Africa to use blockchain technology to improve government operations, particularly in managing salaries and pensions.

In practice, the platform operates using blockchain technology, which is a virtual ledger. This ledger securely stores and exchanges information in a way that cannot be modified. Each transaction is recorded in near real-time on a tamper-evident register. The blockchain solution identifies discrepancies and raises alerts when there is 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.

While the solution isn’t currently integrated with AI models, it has the necessary data to train predictive AI models to forecast key insights for decision making, such as estimating wrongful or misdirected payments. The advent of generative AI may lead to further advancement in the future related to data analysis and other areas.

How does the platform benefit Guinea-Bissau and its citizens?

Gijon: The program support by the ECF and the blockchain solution are playing a crucial role in improving the fiscal and economic stability of Guinea-Bissau.

When the project design started in 2020, the total wage bill was equivalent to 84 percent of tax revenues, the highest ratio in the region. In other words, for one hundred dollars collected in taxes, eighty-four dollars were spent on salaries. This ratio has now declined to 50 percent—a huge improvement, but still high compared to the West Africa Economic and Monetary Union (WAEMU) regional fiscal convergence criteria of wages not exceeding 35 percent of tax revenues. This blockchain solution aligns with the country’s policy priorities of improving fiscal transparency and governance, in line with the IMF-supported program.

More broadly, the initiative will help increase accountability and reduce any perception of public corruption, and in turn help build trust in fiscal institutions. By improving and automating salary management, it will make government operations more efficient. And by identifying inconsistencies in salary information, it will raise alerts for potential fraud.

What lies ahead for Guinea-Bissau’s blockchain initiative?

Verdugo Yepes: The blockchain team has already started to scale up the project to include other ministries and agencies in Guinea-Bissau. By November 2024, the digital platform could potentially track the information for all 26,600 public officials and 8,100 pensioners. The project’s main goals for the future are to continue to improve the transparency of wage bill management, ensuring that public officials will be hired only if they are eligible to do so in accordance with Guinea-Bissau’s regulatory framework, that wage bill payments will all be 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 across other ministries. This ongoing collaboration highlights the shared goal of enhancing governance and fostering sustainable economic development in the region. Guinea-Bissau’s story is not just one of technological advancement, but a testament to the power of collaboration, resilience, and vision for a better future.

Source:norvanreports.com