The Bank of Namibia is exploring a central bank digital currency (CBDC) to enhance cross-border payments and financial inclusion, following IMF recommendations for careful consideration. Initial preparations are underway, with emphasis on improving existing payment systems prior to a launch, influenced by consultations with various African central banks.
The Bank of Namibia (BoN) is considering 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 central bank has begun initial preparations for a potential CBDC rollout. This development indicates a proactive approach towards adopting digital currency, although a launch is not anticipated imminently due to ongoing assessments of existing payment infrastructure.
According to Kazembire Zemburuka, BoN’s director of strategic communications and international relations, the bank is examining how a CBDC could facilitate greater financial inclusion in Namibia. The BoN’s considerations are heavily influenced by the IMF’s guidelines for launching CBDCs, which encompass five key phases: preparation, proof-of-concept, prototypes, pilot, and production.
The BoN is actively engaging with central banks from Eswatini, Lesotho, and South Africa to evaluate the feasibility of implementing a CBDC for cross-border transactions among these countries. Despite the interest in exploring CBDCs, the IMF has advised Namibia against an immediate launch, suggesting that enhancing the existing payment system should take precedence.
The IMF’s feasibility study indicated that a retail CBDC may not significantly address Namibia’s financial inclusion challenges. It emphasized the importance of understanding the potential impacts of digital currency on monetary policy and financial stability before proceeding further. Zemburuka noted that the BoN is incorporating the IMF’s recommendations to refine its strategy regarding the CBDC initiative.
The IMF expressed concerns about advancing to technological development stages for a CBDC unless clear benefits are identified. The organization suggested alternative measures to strengthen financial inclusion rather than pursuing advanced solutions immediately. BoN’s exploration of a digital Namibian dollar began in 2022, although collaboration with neighboring countries has shown limited progress so far.
Namibia is not alone in its digital currency ambitions, as Nigeria has attempted the launch of the eNaira, facing challenges, while Zimbabwe introduced a gold-backed digital currency to counter currency devaluation. Additionally, Ghana is preparing to unveil its eCedi following successful pilot programs after a two-year delay. These developments underscore the growing interest in CBDCs across the African continent.
In summary, the Bank of Namibia is taking cautious steps towards exploring a CBDC, driven by the need for improved cross-border payments and financial inclusion. However, recommendations from the IMF suggest a focus on enhancing existing payment mechanisms before a substantial launch. The ongoing efforts and coordination with neighboring central banks reflect a thoughtful and strategic approach to digital currency initiatives in the region.
Original Source: www.mariblock.com
