A recent survey conducted by the International Monetary Fund (IMF) among 19 central banks in the Middle East and Central Asia (ME&CA) region has revealed that central bank digital currencies (CBDCs) may not be essential to achieve desired policy objectives. However, they have the potential to promote financial inclusion and reduce the cost of financial services.
The IMF survey emphasizes the advantages of CBDCs in enhancing financial inclusion and cutting down financial service costs. Nevertheless, it stresses the importance of thoughtful consideration before adopting a CBDC.
The IMF has been extensively researching the development of CBDCs and offering guidance to member countries on the potential integration of these digital currencies into their monetary systems. The survey suggests that addressing underlying constraints and improving existing digital payment systems could be a more practical alternative to CBDCs.
A senior IMF official has also highlighted the benefits of a global CBDC platform, stating that “a unified global CBDC platform with capital controls could decrease payment expenses.” Several countries in the ME&CA region, including Saudi Arabia, have been exploring the possibility of implementing CBDCs as potential replacements for cash, as mentioned by the IMF’s Managing Director Kristalina Georgieva.
Various countries have already implemented cross-border technology platforms to address these concerns and encourage digital currency payments across borders. For instance, the Buna cross-border payment system, established by the Arab Monetary Fund in 2020, is one such example.
The IMF notes that central banks have the advantage of maintaining lower costs as they are not profit-driven like commercial banks. The competition in the payments market due to CBDCs could lead to the adoption of advanced technology platforms and improve the efficiency of payment services, thereby expanding financial services to a broader audience.
However, policymakers must be cautious about potential risks to financial stability associated with CBDCs. The IMF recommends that a healthy banking system, a robust legal framework, and strong supervisory and regulatory capacity are crucial in reducing risks.
Selecting the appropriate features for CBDC implementation presents a significant challenge for regional policymakers. Achieving policy objectives of enhancing financial inclusion and payment system efficiency will rely on making suitable design choices.
The IMF is actively assisting countries in exploring CBDCs by providing capacity development and surveillance support to policymakers. The entity is also releasing new chapters of its CBDC handbook, focusing on specific country capacity development queries, evaluation of needs and risks, and developing concrete plans to issue a CBDC.
In conclusion, the IMF’s survey sheds light on the potential benefits of CBDCs in the ME&CA region, emphasizing the importance of careful consideration and strategic planning in adopting these digital currencies.