Middle East countries can further promote financial inclusion and boost cross-border payments by adopting a central bank digital currency (CBDC), according to the International Monetary Fund (IMF).

At least 19 countries in the region, as well as Central Asia, are planning to issue a CBDC.

Several of these states are currently exploring the option at the research stage, except for countries like the UAE, Saudi Arabia, Bahrain and Georgia, which have moved to the more advanced “proof-of-concept” stage, and Kazakhstan, which has already carried out two pilot programmes.

“CBDCs can potentially help improve the efficiency of cross-border payment services. This appears to be an important priority for oil exporters and the Gulf Cooperation Council (GCC) countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates,” the IMF said in its latest blog.

“That’s because cross-border payments tend to have frictions like varying data formats and operating rules across regions and complex compliance checks. CBDCs that address these inefficiencies could significantly cut transaction costs.”

The lender noted that central bank digital currencies can promote financial inclusion by fostering competition in the payments market and allowing for transactions to be settled more directly and with less intermediation. This, in turn, will lower the cost of financial services and make them more accessible.

Central banks can also keep the costs lower, unlike commercial lenders, as they are not profit-oriented.

Within the remittance space, the cost of transfers could be lowered, and the transfer times could be sped up.

The impact, however, could vary from one country to another.


One of the risks is that CBDCs may compete with bank deposits, which make up a huge chunk of bank funding in the region.

This could then put pressure on the profits of lenders and have implications for financial stability, although banks in the region generally enjoy adequate capital levels, profit margins and liquidity buffers. Within the GCC, large banks are especially dominant.

“For monetary policy, CBDCs could strengthen the pass-through into deposit rates by increasing competition among banks,” the IMF said.

“A CBDC could also strengthen the bank lending channel of monetary policy. However… the impact would likely be country-specific and is difficult to estimate because CBDC uptake is limited so far.”

(Writing by Cleofe Maceda; editing by Seban Scaria)