Central bank digital currency: what it can achieve and cannot achieve in Africa

Ozili, Peterson K (2024): Central bank digital currency: what it can achieve and cannot achieve in Africa. Forthcoming in:

Abstract

This article presents a discussion on what a central bank digital currency (CBDC) can achieve in African countries and what a central bank digital currency may not achieve in African countries. The study shows that a central bank digital currency can achieve the following. CBDC can become a monetary policy tool; it can reduce the size of the informal economy; it can increase financial inclusion; it can increase digital financial literacy; it can reduce the circulation of counterfeit paper money; it can deepen existing payments system; it can improve social programmes and targeted welfare; it will increase transaction monitoring and surveillance; it can address tax evasion and increase tax revenue in African countries. The study also shows that a central bank digital currency may not completely replace cash in African countries; the issuance and use of CBDC won’t make African countries earn a ‘developed country’ status; CBDC adoption may not stop institutional corruption; CBDC adoption will not stop illicit activities in African countries; and CBDC adoption may not reduce the level of poverty in African countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: central bank digital currency, CBDC, Africa, poverty, financial inclusion, monetary policy, remittance, informal economy, welfare, corruption.
• Subjects: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E59 - Other

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