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Jordan is in a prime position to reap the benefits of a central bank digital currency (CBDC) in solving a litany of payment challenges, according to the International Monetary Fund (IMF).
The IMF made its findings in a report titled “Jordan: Retail Central Bank Digital Currency Exploration,” noting that domestic payment systems appear “well integrated.” However, it stressed that an affinity for cash transactions and high transaction costs continue to slow the growth of Jordan’s financial system.
The monetary agency said that launching a retail CBDC will enhance domestic payments, improve financial inclusion, and reduce the costs associated with cross-border remittances. Currently, Jordan’s financial inclusion is pegged at 43%, which the IMF believes could be higher given the country’s “young and tech-savvy population.”
In terms of cross-border payments, the IMF report claims that retail CBDCs will have the most immediate impact. A significant chunk of Jordan’s GDP comprises remittances, with nearly 800,000 citizens working outside the country and sending funds back home.
On the flipside, Jordan houses a large number of migrants from its neighbors that make up nearly 50% of its unskilled workforce. The IMF stated that a retail CBDC with cross-border payment functionality would allow both classes of individuals to send funds internationally without the traditional impediments of high costs and delays.
“Despite generally accessible and appropriate product offerings and an enabling environment, various barriers prevent customers from extensively using digital means of payment,” read the report. “rCBDC (retail CBDC) might create an opportunity to overcome these barriers, thus making a cross-border rCBDC worth consideration.”
The IMF has pledged to offer technical assistance to the Bank of Jordan, warning the central bank to be wary of certain pitfalls associated with launching CBDCs. In its report, the IMF warned that a botched CBDC launch could trigger bank disintermediation and unwanted financial issues.
IMF leading the vanguard for CBDC
The IMF has reiterated its stance on playing a prominent role in experimenting with CBDCs, disclosing plans for launching a CBDC handbook. Deputy Managing Director of the IMF Bo Li revealed that the handbook would complement its policy paper for central banks looking to explore CBDCs.
“The Handbook will be a compendium of knowledge and experience on CBDCs,” said Li. “It will be the basis for capacity development and hopefully help countries make as well-informed decisions as possible when taking the major step to design and issue their own CBDC.”
The IMF confirmed that over 40 nations had requested technical assistance from the body, with Peru being the latest. While the IMF appears to be leading the way, the Bank for International Settlements (BIS) and the G7 nations offer templates for countries to follow in launching CBDC.