Namibia does not urgently need a retail Central Bank Digital Currency (rCBDC), according to a recent International Monetary Fund (IMF) study, which found that existing digital payment solutions are already addressing key financial challenges.
The study, conducted in collaboration with the Bank of Namibia (BoN), assessed the feasibility of introducing an rCBDC to modernise payments and improve financial inclusion.
“The mission did not find a strong case for issuing a rCBDC at the moment, considering forthcoming payment instruments and improvements,” the report read.
The report further says ongoing initiatives like NamPay and Instant Payment Solutions (IPS) are already improving affordability, accessibility and transaction efficiency within the country.
Additionally, cross-border payment systems such as Transaction Cleared on an Immediate Basis (TCIB) are expected to enhance regional payment integration.
Experts pointed out that while rCBDC has potential benefits, including fostering competition and enabling offline transactions, it is unlikely to resolve core financial inclusion challenges, such as inadequate digital infrastructure and low financial literacy.
Instead, the study recommended that authorities prioritise strengthening existing payment systems, expanding financial education, and enhancing digital infrastructure.
“However, limited accessibility to digital infrastructure in rural areas, high digital transaction costs, strong preference for cash, and low financial literacy continued to be main barriers to the enhancement of financial inclusion in Namibia,” the report read.
The study also raised concerns about potential risks to financial stability if rCBDC were introduced too soon.
These include increased pressure on liquidity management, fluctuations in market rates, and the risk of funds shifting from banks to digital currency, which could disrupt traditional banking operations.
“For financial stability, a significant substitution from bank deposits to rCBDC could lead to banking disintermediation risk,” the report read.
This comes as the BoN has been exploring the potential of rCBDC to modernise Namibian payment and financial systems.
In October 2022, the BoN initiated a Central Bank Digital Currency (CBDC) working group and published a CBDC consultation paper to seek public feedback on BoN’s initial thinking and objectives for rCBDC.
BoN Director of Strategic Communications and International Relations Kazembire Zemburuka said the apex bank is monitoring global CBDC trends and researching how CBDCs could improve cross-border payments within the Common Monetary Area (CMA).
“The Bank has also been in close collaboration with the IMF. A recent feasibility study, which is available to the public, includes the value proposition of CBDC in addressing gaps in Namibia’s payment systems and financial inclusion, as well as the implications of CBDC on monetary policy and financial stability,” he said.
