The Bank of Namibia is considering the issuance of a CBDC to enhance cross-border payments and financial inclusion, though the IMF recommends caution and prioritizing existing payment systems improvement. Engaging with regional central banks, the BoN aims to refine its strategy by following a structured rollout process as advised by the IMF, which emphasizes research over immediate digital currency implementation.
The Bank of Namibia (BoN) is contemplating the introduction of a central bank digital currency (CBDC) aimed at enhancing cross-border payments and promoting financial inclusion. Following a technical assistance mission from the International Monetary Fund (IMF), the BoN has entered a preparatory phase for the potential rollout. Kazembire Zemburuka, the director of strategic communications and international relations at BoN, indicated that the bank is analyzing how a CBDC could foster financial inclusion within Namibia.
The IMF has advised the Bank of Namibia to take a cautious approach toward launching a CBDC, emphasizing the importance of improving the existing payment infrastructure first. Their recommendations suggest a structured five-phase process for CBDC implementation: preparation, proof-of-concept, prototypes, pilot, and production phases. The BoN is actively engaging with colleagues from the central banks of Eswatini, Lesotho, and South Africa to explore the feasibility of a CBDC for cross-border transactions among these nations.
In its findings following a feasibility study, the IMF stated that Namibia currently has no urgent need to implement a CBDC. Though supportive of the BoN’s evaluative efforts, the IMF underscored that launching a digital currency would not necessarily resolve existing financial inclusion challenges. Instead, they recommended focusing on research to understand the potential implications of a digital currency on monetary policy and financial stability.
Zemburuka expressed that the BoN is taking the IMF’s guidance into consideration as it refines its strategy regarding the CBDC initiative. The IMF noted in its report, “As the mission did not find a strong support for rCBDC issuance to address gaps in payments, it recommends against pursuing advanced technological exploration beyond proof-of-concept until tangible benefits of CBDC for payments are evident.” Furthermore, the report suggested exploring alternative measures to bolster financial inclusion rather than developing a new payment infrastructure.
The exploration of a digital Namibian dollar began in 2022 when the BoN released a consultative paper on CBDCs. Little progress has since been noted in their collaboration with the central banks of neighboring countries on cross-border CBDC use cases. Noteworthy is Nigeria’s pioneering launch of the eNaira in 2021, which faced challenges, and Zimbabwe’s introduction of a gold-backed digital currency to counteract local currency devaluation earlier in 2023. Ghana also announced plans to launch its CBDC, the eCedi, by year’s end after delaying for two years despite successful pilots.
In summary, the Bank of Namibia is examining the potential advantages of a central bank digital currency while heeding the International Monetary Fund’s advice to enhance existing payment systems rather than rushing into implementation. The bank’s engagements with regional counterparts underscore a strategic approach to improve cross-border transactions. A careful evaluation of such initiatives could facilitate financial inclusion and monetary stability in the country.
Original Source: www.mariblock.com
