Bank of Namibia mulls CBDC launch for crossborder payments

The IMF dissuaded the country from a quick launch, asking it to instead to prioritize improving its existing payment infrastructure. 

Bank of Namibia mulls CBDC launch for crossborder payments
Design by Omowunmi Babalola for Mariblock.

The Bank of Namibia (BoN) is exploring the issuance of a central bank digital currency (CBDC) to improve cross-border payments and expand financial inclusion.

The central bank has entered a preparatory phase ahead of a potential CBDC rollout, following a recent technical assistance mission with the International Monetary Fund (IMF).

The details 

  • According to reports, BoN’s director of strategic communications and international relations, Kazembire Zemburuka said the bank is studying to see how a CBDC can help financial inclusion in the country. 
  • He added that BoN’s CBDC efforts are greatly influenced by the IMF’s general recommendations for launching a CBDC. 
  • In its guide to countries looking to roll out digital versions of their local currencies, the IMF set forth a five-phase guideline — preparation, proof-of-concept, prototypes, pilot and production phases. 
  • The Bank of Namibia (BoN) is in discussions with central banks in Eswatini, Lesotho, and South Africa to assess the feasibility of a CBDC for cross-border payments between these nations.

The IMF recommendation  

  • Following its technical assistance mission to Namibia, the IMF advised that the country had no immediate need for a CBDC. While it supported the BoN's exploration efforts, it cautioned against an immediate rollout.
  • In its February feasibility study report, the IMF advised Namibia to focus on enhancing its existing payment system rather than pursuing an immediate CBDC launch.
  • It added that a retail CBDC does little to offer a unique solution to the country’s financial inclusion problems. 
  • Instead, it asked the country to focus on researching the potential of a digital currency to affect its monetary policy and financial stability. 
  • Zemburuka said the BoN is considering the IMF’s recommendation to help it finetune its approach towards the CBDC launch. 

Key quote 

  • The IMF, in its technical assistance report, said: 
“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.” 
  • It added: 
“Instead of developing a novel payment infrastructure such as rCBDC, the BoN could consider alternative solutions such as supporting measures or regulations to enhance financial inclusion.” 

Before now 

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