Namibia Weighs Digital Currency as IMF Urges Caution

Namibia is exploring the potential launch of a central bank digital currency (CBDC) to enhance cross-border payments and financial inclusion. However, the Bank of Namibia (BoN) remains in the research phase, carefully evaluating whether a CBDC would effectively address the country’s financial challenges. This move follows a recent technical assistance mission from the International Monetary Fund (IMF).

IMF Urges a Measured Approach

While the IMF acknowledges BoN’s interest in digital currency, it has advised against a hasty rollout. Instead, the organisation recommends that Namibia first strengthen its existing payment infrastructure before embracing a full-scale CBDC. The IMF also remains sceptical about whether a retail CBDC (rCBDC) would significantly improve financial inclusion in the country.

Despite these concerns, BoN is engaging with central banks in Eswatini, Lesotho, and South Africa to examine the feasibility of a CBDC in streamlining cross-border transactions. The institution has stated that it values the IMF’s recommendations and intends to refine its strategy before making any final decisions.

Learning from Others’ Experiences

Namibia first introduced the concept of a digital Namibian dollar in 2022, releasing a consultative paper on CBDCs. However, progress has been slow, with discussions primarily centred on potential use cases with regional central banks. This cautious approach reflects lessons from other African nations that have faced difficulties in implementing digital currencies.

Nigeria, for instance, launched the e-Naira in 2021, but adoption has been sluggish. Meanwhile, Zimbabwe introduced a gold-backed digital currency in 2023 as a hedge against its rapidly depreciating local currency. Ghana has also been working on its e-Cedi for years but has yet to transition beyond the pilot phase.

Namibia’s Next Move

Will Namibia forge ahead with a CBDC, or will it heed the IMF’s call to prioritise existing financial systems? For now, BoN is proceeding with caution, weighing its options carefully before making a definitive move.