EFFORTS to improve the accountability and transparency of the government’s annual budget potentially took a major step forward this week with the announcement that blockchain technology will be applied to the record-keeping of the 2026 General Appropriations Act (GAA). We say “potentially” because there is a great deal of work that must be done for the project to be successful. That includes tempering the government’s hype about the subject and arming the public with a basic understanding of what blockchain technology is and what it can do in this application.
Secretary Henry Aguda of the Department of Information and Communications Technology (DICT) announced the blockchain initiative during a press conference in Malacañang on Thursday. Aguda said the initiative, known as the Digital Bayanihan Chain, digitized the full budget cycle, including congressional approval, disbursement, expenditure and reporting, to create a tamper-proof record of government spending. The DICT chief also emphasized that the Philippines has thus become the first country to adopt a blockchain system for its entire national budget, although other countries do use the technology in some budget processes.
Blockchain is a decentralized, distributed database in which data is stored across multiple computers in a network, rather than in a single location. It is considered secure and tamper-proof because every node in that network has access to the entire database, and the existing “blocks” of data in the “chain” cannot be changed once the process of compiling data into a new block has begun. If someone attempts to change data from one location in the network, the change would be instantly detected and rejected, because it would not agree with the record kept by all the other points in the network. Similarly, new data being added must be validated by a number of network nodes at once before it is allowed to become part of a new block.
The advantage of blockchain when applied to budget processes is that any transaction within the budget system is traceable through an immutable record back to its source. For example, a payment to a contractor for work on a Department of Public Works and Highways (DPWH) flood control project can be traced back through the various steps all the way back to the original, approved appropriation for the DPWH of which the project is a part. The system works the same way in the other direction as well, allowing a secure accounting of where all the money in a particular GAA line item was eventually spent.
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Despite the implication to the contrary in Secretary Aguda’s remarks, the use of blockchain cannot prevent misuse of public funds, though it does make misuse more difficult. The real advantage of the system in terms of curbing corruption is in making every expenditure, legitimate or otherwise, much easier to investigate, which in itself could be a significant deterrent to corrupt practices. However, while the blockchain cannot be tampered with, it will require other secure steps in order to prevent data from being manipulated in some way before being added to the blockchain. An example of this might be recording a payment made to a nonexistent contractor.
And of course, the existence of the blockchain does absolutely nothing to affect the formulation of the national budget in the first place. This, as we have seen, is where many of the risks of corruption originate, as both the administration and Congress have opportunities to add, subtract or shift funds for uncertain purposes.
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The rather boastful acknowledgment that the Philippines is the first country to apply the blockchain to its entire budget may give us pause as well. Other countries have already applied blockchain to parts of their budget processes, but none have evidently found it practical to do so comprehensively. That suggests that it may be problematic in some way, and that by “leap-frogging, instead of following suit,” as Aguda put it, the government may be setting itself up for unforeseen problems. Aguda also was a bit unclear about what the actual status of the blockchain initiative is, saying at first that the Philippines is “the first country in the world to have a fully on-chain national budget,” but then shortly after saying, “By the end of this year, the Philippines will be the first country to put its entire national budget into a tamper-proof system.”
While a few questions remain to be answered, and a few expectations ought to be moderated, the initiative should nevertheless be an upgrade. If implemented effectively, it will, at a minimum, provide much more secure budget records, and make budgeting and expenditure processes across different departments and agencies more consistent.
