IMF Survey Finds CBDCs Could Enhance Financial Inclusion in Middle East
The International Monetary Fund (IMF) has completed a comprehensive survey across 19 countries in the Middle East and Central Asia, investigating the adoption and potential impact of central bank digital currencies (CBDCs).
Released on Tuesday, the survey findings indicate that CBDCs have the capability to promote financial inclusion and improve the efficiency of international remittances. Many of the surveyed countries are currently in the research phase regarding CBDCs. According to the insights, “Bahrain, Georgia, Saudi Arabia, and the United Arab Emirates have progressed to the advanced ‘proof-of-concept’ stage,” while Kazakhstan has shown notable advancement with two pilot programs for the digital tenge.
Enhancing Financial Inclusion through CBDCs
The survey underscores that CBDCs foster competition in the payments market and simplify transaction settlements, thereby reducing the cost of financial services and increasing accessibility.
However, it also highlights associated risks that could diminish the potential benefits unless effectively addressed. These risks include low levels of digital and financial literacy, inadequate identification systems, distrust of financial institutions, and economic disparity.
The IMF’s insights propose that policymakers can mitigate these risks to ensure financial stability. Another critical consideration is selecting appropriate features for CBDC implementation.
IMF Recommendations for CBDC Advancement
The IMF suggests that designing CBDCs to function offline could significantly benefit regions with limited internet access, thereby promoting broader financial inclusion. Moreover, utilizing CBDCs for international transfers could potentially reduce the costs associated with remittances and expedite transaction speeds.
IMF’s Role in CBDC Development
IMF has been actively assisting central banks in exploring and developing CBDCs by providing a structured approach, known as the 5P methodology: preparation, proof-of-concept, prototypes, pilots, and production.
“We assess the potential impact of CBDCs on monetary policy,” stated IMF in November 2023. “Our goal is to design CBDCs that facilitate efficient cross-border payments while managing capital flows effectively.”
Continued Engagement and Guidance
IMF remains committed to collaborating with central banks, continuously evaluating the implications of CBDCs on various aspects ranging from financial stability to cybersecurity and cross-border payments.
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