(Ecofin Agency) - Guinea-Bissau is set to expand its blockchain-based payroll management platform to cover all government employees. By November 2024, this solution may track the information of approximately 26,600 public servants and 8,100 retirees in the country. Concha Verdugo Yepes, a senior economist at the International Monetary Fund (IMF) Africa Department and head of the institution's Blockchain Solution program, shared this news during an interview with IMF Country Focus published on October 2.

“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,” Yepes said.

When the project was first designed in 2020, 84% of the state’s tax revenue went toward paying public employees in Guinea-Bissau. This was the highest rate in the region, according to José Gijon, the IMF mission chief in Guinea-Bissau. He noted, "For one hundred dollars collected in taxes, eighty-four dollars were spent on salaries." This ratio has now dropped to 50%, marking significant improvement, though it still exceeds the regional budgetary convergence criteria set by the West African Economic and Monetary Union (WAEMU), which states that salaries should not exceed 35% of tax revenue.

The government of Guinea-Bissau has adopted blockchain to combat issues such as poor governance, public fund misappropriation, and corruption. The days of ghost workers, payroll fraud, and other deceitful practices fueled by poor public fund traceability are coming to an end. The platform securely records, stores, and exchanges information, ensuring that it cannot be altered. Each transaction is tamper-proof, and the system flags any discrepancies in salary information to the appropriate authorities.

For the IMF, this solution opens up further opportunities. It also simplifies the auditing process and reconciliations while feeding artificial intelligence (AI) models with reliable, up-to-date, high-quality data.

According to the Organisation for Economic Co-operation and Development (OECD), governments need credible public finance management frameworks to build trust with international donors and local and foreign investors. A crisis of confidence in a government jeopardizes the financial resources essential for the country’s economic and social development.