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.