Egypt’s Minister of International Cooperation Rania Al-Mashat chaired, on Saturday, the first meeting of the national technical, legislative, and legal committee to study the country’s action plan regarding the global financial institutions’ decision to discontinue using the London Interbank Offer Rate (LIBOR) as a benchmark for setting interest rates after 2021.
The LIBOR has been widely used since the 1970s as a reference rate for various financial instruments.
The committee, formed by the Prime Minister, aims to discuss the government’s measure to phase out of LIBOR in 2021, in a way that ensures a smooth transition and fulfils the interests of the Egyptian state. The committee includes representatives from the Central Bank of Egypt (CBE) and the Cabinet, and the World Bank.
Al-Mashat said, “It is important that the World Bank, along with the borrowing countries, present a proposal regarding the discontinuation of LIBOR, especially as Egypt is one of the largest countries that cooperate with the Bank in development financing projects.”
The minister pointed out that the committee will coordinate with the CBE and Ministry of Finance to benefit from the LIBOR end to reduce the burden of debt service on the Egyptian government.
During the meeting, the World Bank team gave a presentation on its initiative to shift from the LIBOR, which included providing an alternative reference interest rate that would work in the international community’s favour. The Bank noted that the current financing at LIBOR rates amounted to approximately $400trn around the world.
It added that the World Bank’s financing portfolio is currently subject to a transition phase in order to reduce operational risks resulting from the benchmark discontinuation.
CBE representative gave a presentation on the practical steps taken by the bank in this regard, in addition to a presentation about the recently launched Cairo Overnight Interest Rate.
At the end of the meeting, the committee agreed to set a clear action plan for coordination and work regarding the World Bank’s initiative to shift from LIBOR.