Guinea-Bissau, a small West African nation, has taken a significant step toward modernizing its governance through the adoption of blockchain technology. In May 2024, the country successfully launched a blockchain platform designed to enhance the management of its public wage bill. This initiative, developed under the Extended Credit Facility (ECF) program with the International Monetary Fund (IMF), reflects Guinea-Bissau’s commitment to improving governance and fiscal transparency. After four years of collaboration with the IMF and technological advisor Ernst & Young, and with financial backing from international partners, Guinea-Bissau has become one of the pioneering nations in Africa to embrace blockchain technology for government operations.
Transforming Wage Bill Management
The newly implemented blockchain platform offers a secure and transparent system for handling public service salary data. By utilizing a digital ledger, the platform enables nearly real-time monitoring of salary and pension eligibility, budgeting, payment approvals, and disbursements. This modern solution significantly enhances data accuracy and integrity, ensuring that fiscal reports can be produced promptly for both policymakers and the general public.
The platform operates through blockchain technology, which securely stores and exchanges information in a way that cannot be altered. Each transaction is recorded on a tamper-proof ledger, providing a clear and reliable record of government wage payments. The technology also identifies inconsistencies in salary data, raising alerts when discrepancies are detected, which helps reduce the burden of audit reporting and reconciliation. This solution delivers high-quality, timely data to support decision-making processes and can be used to train artificial intelligence (AI) models in the future.
While AI integration is not yet part of the system, the platform’s data is structured in a way that could support predictive models. Such AI models could help forecast irregular payments, aiding in the detection of financial mismanagement. As AI technology advances, the system could further evolve, incorporating generative AI tools to analyze data more effectively and uncover additional insights.
Fiscal Stability and Economic Impact
The implementation of this blockchain platform aligns with Guinea-Bissau’s broader policy objectives of enhancing fiscal transparency and improving economic governance. The IMF’s ECF-supported program plays a critical role in these reforms, which have already shown significant results. When the project began in 2020, Guinea-Bissau’s wage bill amounted to 84 percent of its tax revenues, the highest ratio in the region. This meant that for every $100 collected in taxes, $84 was spent on salaries. Through the implementation of the blockchain platform and associated reforms, this figure has been reduced to 50 percent, a notable improvement, though still above the regional benchmark set by the West Africa Economic and Monetary Union (WAEMU), which recommends that wage bills not exceed 35 percent of tax revenues.
The blockchain solution helps Guinea-Bissau work toward achieving this fiscal convergence criterion by improving salary management and reducing potential fraud. In turn, this enhances the government’s overall efficiency and builds trust in the country’s fiscal institutions. By automating key aspects of wage bill management, the platform also strengthens accountability and addresses public concerns about corruption.
Future Expansion and Broader Impact
The blockchain project in Guinea-Bissau is already showing promise for future expansion. By November 2024, the platform could track salary and pension information for all 26,600 public officials and 8,100 pensioners in the country. The main goals for the next phase of the project include further improving wage bill transparency and ensuring that public officials are hired in accordance with regulatory requirements. Additionally, the system will ensure that wage payments are properly budgeted, approved, and monitored, making government operations more streamlined and effective.
The IMF and its international partners remain committed to supporting Guinea-Bissau as the country expands its blockchain system across other government ministries. This ongoing collaboration highlights the shared vision of improving governance and promoting sustainable economic development in the region. Guinea-Bissau’s adoption of blockchain technology serves as an example of how technological innovation, coupled with international cooperation, can drive meaningful change in public sector management.
In conclusion, Guinea-Bissau’s blockchain initiative represents more than just a technological upgrade. It is a bold step toward improving governance, increasing transparency, and building a foundation for long-term economic stability. This development showcases the potential of blockchain technology in government operations and underscores the importance of collaboration in addressing the complex challenges faced by emerging economies.