CBDC | ‘Establish a Compelling Rationale Before Launching a Retail CBDC First,’ IMF Tells Namibia

The Director of Strategic Communications and International Relations at the Bank of Namibia confirmed that the bank is carefully evaluating the IMF’s feasibility study recommendations to refine its roadmap for implementing a Namibian CBDC.

kodzilla··5 min read

The Bank of Namibia (BoN) is assessing the potential of central bank digital currencies (CBDCs) to enhance financial inclusion and facilitate cross-border transactions.

 

Kazembire Zemburuka, the Director of Strategic Communications and International Relations, stated that the central bank is currently in the preparation phase of evaluating a domestic CBDC. He added that the BoN is exploring the feasibility of CBDCs for both retail and wholesale sectors, along with their potential impact on cross-border payments.

“The bank’s exploration is guided by the IMF’s 5P Methodology and involves extensive research and staff training,” Zemburuka said.

He noted that a recent feasibility study, conducted with technical assistance from the IMF, plays a crucial role in this research.

The study examined the impact of CBDCs on financial inclusion and monetary policy, outlining a potential roadmap for implementation.

Additionally, the Bank of Namibia is working with:

  • The Bank of Eswatini
  • The Bank of Lesotho, and
  • The South African Reserve Bank

to explore cross-border CBDC usage within the Common Monetary Area (CMA) to enhance regional payments.

 

“CBDC alone can’t solve issues like digital infrastructure and financial literacy,” said Kazambire.

“Despite challenges, like integrating CBDC with NamPay and IPS, BoN views CBDC as a valuable digital payment option. The bank is committed to addressing macro-financial risks related to liquidity, market rates, and foreign exchange reserves.”

 

Zemburuka confirmed that the BoN is carefully evaluating the IMF’s feasibility study recommendations to refine its roadmap for implementing a Namibian CBDC.

According to the IMF report, this engagement was the third in a series of discussions with the BoN on retail CBDCs (rCBDC). The first was a virtual CBDC workshop in February 2023, followed by a four-day virtual training in October 2023 aimed at enhancing BoN staff’s expertise in rCBDC.

 

The IMF advised Namibia to establish a clear rationale for launching an rCBDC before committing to a more resource-intensive exploration. Additionally, the central bank was encouraged to thoroughly assess the benefits and risks of both rCBDC and alternative non-CBDC solutions.

“The BoN should establish internal policy dialogues to make well-informed decisions and continue engaging stakeholders,” the report stated.

 

The IMF further recommended that the BoN evaluate how existing payment solutions and a retail CBDC (rCBDC) could help address financial inclusion challenges. It advised exploring rCBDC designs that promote inclusion, including offline payments, interoperability, and zero transaction costs.

The report highlighted cash as a key challenge for stakeholders that deter financial inclusion in Namibia. Cash remains the dominant payment method for Namibian people with 84% preferring using cash for payments.

However, the report also highlighted that a a large young population, with half of its 2.6 million population below the age of 24, provides more opportunities of digital transformation.

 

Based on its assessments, the IMF mission recommended that the BoN should:

  • Establish a compelling rationale for rCBDC before embarking on a more resource-intensive exploration.
  • Evaluate the roles of existing payment service solutions and rCBDC in addressing the challenges in financial inclusion.
  • Assess macro-financial implications and explore solutions to mitigate macro-financial risks.
  • Address gaps in institutional capacity, digital readiness, and legal foundations, should the BoN choose to issue a retail CBDC in the future.
  • Lastly, the mission helped draft the roadmap for the BoN’s rCBDC exploration.

The IMF report’s conclusion includes 4 key points:

  • The mission assisted the BoN in laying groundworks for the feasibility study of rCBDC and drafting the roadmap of rCBDC exploration in Namibia.
  • The mission did not find a compelling case for rCBDC issuance at this juncture.
  • Nevertheless, the mission recommended the BoN continue developing in-house expertise in CBDCs and digital payments.
  • Finally, should the BoN opt to issue rCBDC in the future, more efforts are needed to meet foundational requirements.

 

Namibia is among the most advanced jurisdictions for the digital industry having introduced a Virtual Assets Act in 2023, with the Central Bank taking oversight of the sector.

In January 2025, as reported by BitKE, the bank, for the first time, granted provisional authorizations to four entities to offer payment services and virtual asset services.

Namibia is one of the leading countries on the continent for crypto regulation. The Virtual Assets Act of 2023 was introduced to combat money laundering and grant the Bank of Namibia (BoN) regulatory oversight over virtual asset services.

 

According to the IMF, Central bank digital currency (CBDC) has been a subject of interest for central banks in Sub-Saharan Africa.

According to a 2023 IMF survey of Sub-Saharan countries, more than 75 percent of surveyed countries are currently exploring CBDC, with improving financial inclusion and domestic payment efficiency as top motivations. The survey also shows that central banks are at different paces for exploration. Two-thirds are in the research phase (for example, Eswatini, Lesotho) whereas others are at an advanced stage or already plan to complete CBDC pilots within the next few years.

  • Nigeria became the second country (after Bahamas) to launch its retail CBDC (rCBDC), eNaira, in October 2021.
  • Meanwhile, South Africa has been exploring wholesale CBDC under Project Khokha. The country also partners with Australia, Singapore, and Malaysia to develop prototypes of a shared platform, to enable international settlements using CBDCs issued by multiple central banks under Project Dunbar.
  • Ghana also engaged with a private technology vendor to pilot a rCBDC, eCedi.
  • However, Kenya stated that CBDC is not a compelling short- or medium-term priority, after issuing a discussion paper on CBDC.

Overall, technical, capacity, and legal challenges impose key concerns for regional central banks to pursue and operate a CBDC.

 

 

Follow us on X  for the latest posts and updates

Join and interact with our Telegram community

__________________________________________

__________________________________________

Related
All Rights Reserved - BitcoinKe.io
2020 © Zeen World News