The International Monetary Fund (IMF) has announced that 19 countries in the Middle East and Central Asia are currently in the advanced stage of testing central bank digital currencies (CBDCs). This includes countries like Bahrain, Georgia, Saudi Arabia, and the UAE. The IMF's goal is to assist policymakers in evaluating the need for CBDCs and to help them develop strong policies and regulatory frameworks to minimize risks to monetary and financial stability.
In a recent blog post titled "Central Bank Digital Currencies Can Boost Middle East's Financial Inclusion, Payment Efficiency," the IMF highlighted the potential benefits of CBDCs in enhancing financial inclusion and improving payment efficiency in the region. According to the post, nearly two-thirds of countries in the Middle East and Central Asia are exploring CBDCs for these reasons.
The post noted that CBDCs have the potential to improve cross-border payment services, which is a priority for oil exporters and Gulf Cooperation Council countries like Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. Cross-border payments often face challenges such as varying data formats, operating rules, and complex compliance checks. CBDCs could address these inefficiencies and significantly reduce transaction costs.
Furthermore, the IMF emphasized that CBDCs can promote financial inclusion by fostering competition in the payments market and enabling direct transactions with fewer intermediaries. This could lower costs and increase accessibility, especially in regions such as the Caucasus, Central Asia, Middle East, and North Africa oil importers, as well as low-income countries. Central banks, being non-profit driven, can offer lower costs compared to commercial banks, potentially improving payment services and technology platforms.
However, the IMF acknowledged that certain barriers must be addressed to maximize the benefits of CBDCs. These barriers include low digital literacy, lack of identification, distrust of financial institutions, and low wealth. Policymakers can mitigate risks by ensuring a healthy banking system and robust regulatory framework. Design features like offline functionality can also promote inclusion in areas with poor mobile service.
The IMF reiterated its support for countries exploring CBDCs and offered guidance on policy and regulatory frameworks to minimize risks. Through capacity development and surveillance, the IMF aims to help policymakers evaluate the need for CBDCs and develop strong policies and regulatory frameworks that prioritize monetary and financial stability.
The blog post concluded by inviting readers to share their views on the benefits of CBDCs for countries in the Middle East and Central Asia.