East African Community partner states have agreed to close down multiple bank accounts operated by their ministries, departments and agencies and keep their revenues in a single account each as part of efforts to increase transparency and accountability in the use of public funds.
The partner states agreed on the Treasury Single Account (TSA) to ensure proper oversight of government cash flows and to reduce the cost of keeping public money in several commercial banks.
Tanzania has set the pace, with Finance Minister Phillip Mpango saying the move will reduce the number of government accounts.
“I propose to make amendments to the Local Government Finance Act, CAP 290, the Public Finance Act, CAP 348 and the Bank of Tanzania Act, CAP 197 in order to introduce a Treasury Single Account, which will be used for collection and payment of government funds,” said Dr Mpango while tabling the 2018/2019 budget.
In Kenya, the Public Finance Management Bill 2017 sets the stage for the creation of the single government account.
All public funds will be deposited into the single account and all payments will be executed from the same account, enabling the government to monitor its finances.
According to Britam Asset managers, there is a risk that significant deposits will flow from the banking system to the Central Bank, leading to tighter liquidity in the banking system, with some lenders such as National Bank and KCB likely to be hit hard.
The creation of the TSA is part of the Public Finance (Administration and Management) Regulations 2013, which were formulated to boost the effectiveness of the Public Finance Management Act (2012).
But the project had to be deferred for two years to pave the way for the implementation of other forms of electronic payments such as the Integrated Financial Management Information System (Ifmis) and Internet banking.
It is not clear whether the proposed single accounts will be operated by the central banks of the various countries or a commercial bank on behalf of the central bank, but in many Latin American countries, large publicly owned banks operate the TSA.
The International Monetary Fund, through a working paper dated 2010, said TSAs should be part of the public finance management reform agenda of countries that prioritise prudent management and use of public funds.