The federal government is pushing towards a single account for the treasury to consolidate its financial resources, which promises to streamline budgetary control and trim cash mismanagement.
In recent audits, over 33 billion Br in inefficiencies were uncovered across federal agencies, pressing the need for reform. The new Treasury Single Account (TSA) initiative, integrated into the IFMIS, is projected to roll out fully next fiscal year, targeting improved transparency and budget discipline.
Since the early 2000s, Ethiopia relied on an Integrated Budget & Expenditure Management (IBEX) system, transitioning to IFMIS in 2019. A federal audit disclosed troubling inefficiencies, including 14 billion Br in unaccounted allowances, 19 billion Br in unused budgets from 101 federal agencies, and only 79 out of 169 agencies achieving unqualified audit opinions. In a particularly alarming case, Immigration & Citizenship Services (ICS) was found collecting unauthorised fees through personal bank accounts, contracting services from an unregistered company, Viditure, which cost Ethiopian expatriates.
According to Dawit Shimels, head of public financial management at the Ministry of Finance, the reforms comply with updated financial directives and cash management instructions.
"Centralising government finances will improve liquidity and efficiency," Dawit said. "Consolidating scattered public accounts would enhance oversight."
However, he anticipated potential reluctance among some federal entities during implementation. The authorities are working to identify the total amount of funds dispersed across thousands of federal agency accounts, including dormant ones, to establish clear guidelines for their closure and the subsequent transfer of balances to the TSA.
At a recent public consultation held at the Haile Grand Hotel on Asmera Road, high-ranking officials from the Ministry of Finance, the National Bank of Ethiopia (NBE), and financial consultants brainstormed the opportunities and potential impediments associated with a unified account system. State Minister for Finance Eyob Tekalign (PhD) stated that a single treasury account is necessary for effective financial oversight and fiscal discipline.
"We can curb unnecessary public borrowing," said Eyob.
Bizuneh Bekele, CEO of Digi Finance and a consultant working with the government, outlined two possible TSA frameworks during the meeting. The first is a centralised model at the central bank with sub-transaction accounts, while the alternative maintains daily balance transfers from agency accounts in commercial banks to a central TSA. Bizuneh argued for the necessity for an efficient banking infrastructure and robust administrative capabilities for either model to succeed.
Close to 170 federal agencies manage their budgets through numerous bank accounts, which complicates cash management and causes inefficiencies and financial mismanagement. Finance authorities intend to include all these agencies under the TSA, which will demand substantial amendments to existing budget codes, system upgrades, and extensive training programs for federal employees.
The TSA will incorporate the Integrated Financial Management Information System (IFMIS), enabling real-time monitoring of public funds. Officials believe this integration will offer greater transparency and accountability across public entities. The reform is deemed crucial at a time when federal authorities struggle with budget deficits, characterised by mismatches between inflows, such as taxes, non-tax revenues, grants, loans, and asset sales, and outflows, including debt payments, subsidies, and interest expenses.
Federal agencies managed eight types of accounts, including zero-balance accounts (Z Accounts), introduced in 2005, and "B" accounts that hold revenues generated by agencies. Z Accounts allow agencies to withdraw up to their monthly limits, with daily deposits from the treasury at the NBE. However, misuse of accounts, notably "B" accounts intended only for revenue collection, has exacerbated financial mismanagement.
Bizuneh pointed out large cash idling in "D" accounts, trust fund accounts of certain public entities, further straining treasury operations.
Federal entities have relied heavily on domestic borrowing, often resorting to overdrafts and liquidity injections, causing inflationary pressures and cash shortages. Central Bank officials have reaffirmed their commitment to maintaining an 18pc credit growth cap during persistent inflation. Governor Mamo Mihretu has adopted a more stringent monetary policy, targeting broader macroeconomic policy reforms agreed upon with the IMF.
The National Bank’s monetary policy committee recently tightened its monetary policy, capping credit growth, raising commercial lending rates, and reducing direct government borrowing by approximately 147 billion Br. Despite these measures, inflation remains high at nearly 16pc year-on-year (YoY), proving the difficulties of economic stabilisation are persistent.
Weyneshet Zeberga, director of monetary and financial analysis at the Central Bank, noted that extensive dispersals to government agencies had distorted the money supply, complicating monetary policy operations. She believes the TSA will address these distortions, clarify actual liquidity positions, thereby enable accurate interest rate determinations for treasury bills and interbank markets.
"Interest rate distortions have been apparent due to unknown treasury funds," Weyneshet said. "TSA would facilitate smoother policy implementation by accurately monitoring liquidity levels, stabilising the exchange rate, and ensuring transparent fiscal management."
Globally, TSAs have gained recognition for their effectiveness in managing governmental funds. Nigeria, for example, embarked on its TSA reform in the early 2000s, fully implementing a centralised TSA by 2014. It consolidated revenues and expenditures into a single Central Bank account, reducing idle balances and enhancing financial discipline. India has also adopted a hybrid model, combining centralised and decentralised approaches, although challenges persist in effectively reducing idle funds.
Ethiopian authorities hope to learn from these international experiences as they implement their TSA.
According to Neteru Wondwossen, head of treasury and government accounts at the Finance Ministry, the country has made notable progress in digital payment reforms. Over the past eight months alone, digital transactions have exceeded 343 billion Br, with 95pc of federal agencies exclusively using electronic payments, demonstrating the potential of digital integration with the upcoming TSA.
Nevertheless, integrating donor funds into the TSA remains contentious. Despite international agreements, notably the Paris Declaration of 2005 advocating donor funds integration, Bizuneh cautioned, citing donor concerns over transparency, accountability, and exchange rate fluctuations. While several African countries have successfully implemented TSAs, incorporating donor accounts continued to present disagreements.
"The country has to navigate how to go about it," said Bizuneh, echoing a cautious optimism that Ethiopia can address its longstanding fiscal problems through disciplined and consolidated financial management.
PUBLISHED ON
Mar 30,2025 [ VOL
25 , NO
1300]
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