IMF Staff Country Reports

Kingdom of Bahrain: Selected Issues

Publication Date:

September 18, 2023

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Summary:

Interest in CBDC is growing globally including in Bahrain, which has made considerable strides in the areas of payment service digitalization and fintech. While a CBDC could bring about various benefits, it may also imply risks. The analysis presented in this paper aims to assess some of these benefits and risks for Bahrain. It will quantify the potential impact of introducing a CBDC on the financial system and monetary policy transmission using a model specifically calibrated and estimated for Bahrain. It finds that a CBDC's perceived utility by the population is key for wide adoption. While high adoption and remuneration can help enhance monetary policy transmission, they may imply a drag on banking system profitability. A careful and analytically informed design could enhance adoption while limiting risks to financial stability.

Series:

Country Report No. 2023/333

Subject:

Bank deposits Central Bank digital currencies Central bank policy rate Commercial banks Deposit rates Financial institutions Financial services International organization Monetary policy Technology

Frequency:

regular