The International Monetary Fund (IMF) recently conducted a survey in the Middle East and Central Asia region regarding Central Bank Digital Currencies (CBDCs) and their impact on financial inclusion and payment efficiency. The survey found that while CBDCs may not be essential, they can help advance financial inclusion and reduce the cost of financial services.
According to the IMF, adopting a CBDC requires careful consideration as it may not be necessary to achieve policy goals. The survey highlighted that improving existing digital payment systems and addressing underlying constraints could be a more practical alternative to CBDCs in the region.
The IMF has been actively researching CBDCs and providing guidance to member nations on integrating them into their monetary systems. A senior IMF official mentioned that a global CBDC platform could potentially reduce payment costs and facilitate capital controls.
Several countries in the Middle East and Central Asia have already started exploring the use of CBDCs. For example, Saudi Arabia’s central bank recently participated in a cross-border experiment with CBDCs for international trade in collaboration with the Bank for International Settlements (BIS).
IMF Managing Director Kristalina Georgieva has previously suggested that CBDCs could potentially replace cash in island economies. However, the IMF survey emphasized that the introduction of digital currencies should be a careful and thoughtful process for central banks.
One of the concerns raised by the IMF is the potential competition between CBDCs and traditional bank deposits. Since a significant portion of bank funding in the region comes from deposits, CBDCs could impact bank profits, lending, and overall financial stability.
The survey also noted that the 19 central banks in the region are primarily exploring CBDCs to enhance financial inclusion and improve payment system efficiency. In countries with more developed financial markets like oil exporters in the Middle East and North Africa and Gulf Cooperation Council countries, the focus is on making both domestic and cross-border payments more efficient. On the other hand, in regions like the Middle East and North Africa oil importers, the Caucasus and Central Asia, and low-income countries, the priority is expanding financial inclusion.
However, the survey highlighted that the benefits of CBDCs may be limited without addressing other barriers such as low digital and financial literacy, lack of identification, distrust of financial institutions, and low levels of wealth in the region.
In conclusion, while CBDCs have the potential to enhance financial inclusion and payment system efficiency in the Middle East and Central Asia, careful consideration and thorough analysis are essential before their implementation to ensure that the benefits outweigh the potential costs and risks for the financial system and central banks.
