CBDCs Can Advance Financial Inclusion, But Are Not Essential: IMF Survey

According to CoinDesk, a survey conducted by the International Monetary Fund (IMF) of 19 central banks in the Middle East and Central Asia (ME&CA) region has concluded that Central Bank Digital Currencies (CBDCs) may not be essential to achieve intended policy goals. However, the survey also noted that CBDCs can advance financial inclusion and lower the cost of financial services. Despite this, adopting a CBDC requires careful consideration, and improving other digital payment systems may be a more practical alternative. The IMF has been researching the evolution of CBDCs and guiding member nations on how and whether to integrate them into their respective monetary systems. Several nations in the ME&CA region, including Saudi Arabia, have explored the use of CBDCs. The IMF's Managing Director Kristalina Georgieva has previously suggested that CBDCs could replace cash in island economies. The survey concluded that introducing digital currencies will be a long and complicated process that central banks must approach with care. Policymakers need to determine if a CBDC serves their country’s objectives and whether the expected benefits outweigh the potential costs, risks for the financial system, and operational risks for the central bank. The IMF also warned that since about 83% of funding for the banks in the region come from deposits, CBDCs may compete with bank deposits, which could impact bank profits, lending, and thus the financial stability of a nation. The 19 central banks in the region are exploring issuing a CBDC, with a focus on how CBDCs can enhance financial inclusion and payment system efficiency. The survey findings indicated that the uptake of CBDCs may only have marginal benefits without addressing other barriers such as low digital and financial literacy, lack of identification, distrust of financial institutions, and low wealth.