Ethiopian Review

Addis Ababa, Ethiopia — The Ministry of Finance and Economic Development (MoFED), the Central Bank and the Commercial Bank of Ethiopia (CBE) will sign an agreement on an improved method of handling the accounts of government agencies.

The MoFED is working on moving government agencies’ accounts for salaries of their employees from the Central Bank to the CBE for easy and fast access, officials at the Ministry disclosed.

The Ministry has prepared the agreement document, which is still under discussion by experts, from the signatories, according to Ahmed Shide, state minister of the Finance and Economic Development.

“We are going to move these accounts of the government agencies so that employees could have easy access to their salary through Automated Teller Machines (ATM) at the CBE,” Getachew Negera, head of the Treasury Department of the Finance and Economic Development Ministry told Fortune.

However, the ATMs CBE has bought, have not yet been prepared to handle this operation.

Currently there are about 20 agencies which are paying salaries to the employees’ accounts and the latter withdraw from ATMs in other banks who have the service, according to Getachew.

For instance, the recently restructured Addis Abeba Revenue Authority, under the Finance and Economic Development Bureau, started paying its more than 120 permanent employees who earn above 1,068 Br through Dashen Bank’s ATM cards since early March 2009.

“We want to transfer the money for salary to the bank [CBE] and then they [the employees] can pick their pay from there,” Getachew said.

The accounts issue is not the only thing MoFED is working on. The Ministry has asked these state agencies to maintain the zero balance payment system it had succeeded in achieving last year and is expecting to meet for the ending fiscal year.

It held its fourth yearly meeting with more than 130 agencies, last Tuesday June 16 and Wednesday June 17, 2009.

“The meeting aimed at getting proper cash flow management and budget forecast relatively close to a practical level which can enable efficient administration over such issues,” Ahmed Shide, the state minister of MoFED said in his opening speech of the two-day meeting the Ministry held with different ministries and government agencies.

One major issue raised as a concern by experts at MoFED is that some of the agencies attempt to take cash out of their central bank account but in some cases they do not succeed, according to the Treasury Department a responsible for properly administering the accounts and budget related issues after the Ministry undertook Business Process Reengineering (BPR) study.

Cash flow preparation and forecast of government revenue and expenditures are supposed to be based on fiscal work programs which agencies plan to achieve and to work on.

“In such instances they chose to save that capital in their own bank account (usually referred to as Account B) which is keeping money idle and out of treasury which remains with no reserve,” he explained for the participants.

On the other hand, experts at MoFED are concerned about what they refer to as structural problems in these agencies. They claim that different departments within the agencies, such as finance, planning and program, procurement and administration, do not work together.

“The management of each of these agencies has to play a role to minimize the margin of error during planning, forecasting or implementing,” Bekabtu Arwaga, a senior expert said in his presentation based on which the participants discussed the issue in detail. “In most cases junior finance people are responsible for such duties and that has its own impact.”

Therefore, MoFED now requested for a report on the B accounts (Account B of the agencies) to follow what happens at each of these accounts.

This is meant to bring about two results, MoFED’s experts explain.

One is to minimize the unnecessary amount in the accounts; the amount referred to as unnecessary results in opportunity cost, making the money idle, according to Bekabtu.

The main purpose of the discussion was to sort out ways to minimize the short term loans of the government and identify other alternative ways to address the budget gaps.

- By HILINA ALEMU | Addis Fortune