Guinea-Bissau turns to blockchain to manage public wage bill

In a bid to enhance transparency and curb corruption in the public service, Guinea-Bissau has adopted the use of blockchain technology to manage wage expenditures for civil servants.

Officials overseeing public wage bill management in the country have rolled out a new software platform that leverages blockchain to securely store and exchange salary and pension information, preventing unauthorised modifications. This initiative is being rolled out across all ministries and agencies and is part of a broader set of policy reforms that the government agreed to in its program with the International Monetary Fund (IMF).

“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,” the IMF said, noting that the platform is expected to track the information for all the country’s 26,600 public officials and 8,100 pensioners by November.

The IMF says 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.

“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,” notes Verdugo Yepes, the blockchain project lead.

Improving governance

According to Jose Gijon, Guinea-Bissau mission chief at the IMF, the initiative will help the authorities to improve governance and earn the public’s trust.

“More broadly, the initiative will help increase accountability and reduce any perception of public corruption, and in turn help build trust in fiscal institutions,” he says.

Gijon argued that the blockchain solution, which went live in May, would help lower the public wage bill as a percentage of taxes, freeing up more resources for public services and the nation’s development.

“When we started the project in 2020, the wage bill represented 84% of the tax revenues… there was little room left for health, education, infrastructure, or debt payments. This ratio has now improved to 53%, but it is still high compared to the convergence ratio in the region at 35%,” he says.

The absence of robust controls in public wage bill management remains a significant enabler of  government corruption across Africa. This issue is primarily evident through the presence of ghost workers – fictitious employees listed on payrolls by corrupt officials seeking to fraudulently draw more than one salary from the exchequer. Additionally, cases of misappropriation of funds, where money intended for salaries and pensions is diverted for other uses, continue to dominate local media coverage in many African countries.

More countries could follow suit

To curb this kind of corruption in the public service, more African countries should follow in the footsteps of Guinea-Bissau and leverage blockchain technology, contends Babatunde Oladapo, a tax administrator based in Abuja, Nigeria.

“This is a welcome development bearing in mind that most governments in the region are battling with bloated public sector wage bills,” he tells African Business. “This should be replicated in other countries,” he says, noting that the move would likely translate to significant cost savings for governments.

However, he warns that any attempts to promote transparency in the public service will  invariably face political risks. Policymakers must be prepared for resistance. “To further consolidate the gains of this initiative in Guinea-Bissau and in any other country, it is important to build in a sustainability framework that will ensure that political interference does not derail the cost saving objective.”

Jason Braganza, executive director of the African Forum and Network on Debt and Development (AFRODAD), emphasises that adopting new technology alone is insufficient for effective wage bill management – policymakers must also pursue additional reforms.

“Government efficiency gains are usually about more than the introduction of technology,” Braganza notes. “Certain decisions, such as privatisation and reduced budget allocations, need to be considered. These measures, combined with technology, will enhance transparency and governance.”