CAIRO - 13 October 2020: Minister of International Cooperation and Egypt’s Governor at the World Bank and several other economic institutions Rania Al Mashat stressed the need to be well prepared for the transition from "Libor" and to reach a consensual reference interest rate.
Al Mashat joined the high level discussion organized by the World Bank Group in the 2020 Annual Meetings, entitled "Beyond Libor ... Are we prepared?” which included potential global risks as interest rate "Libor" is expected to be discontinued during 2020 and 2021, and how to come up with alternatives and ensure a smooth transition.
During the World Bank 2020 Annual Meetings, She noted to the importance for the international community and financing institutions to agree on a new reference interest rate within a multilateral framework, in a way that benefits lenders and borrowers.
The session included the participation of Anshula Kant Managing Director and World Bank Group Chief Financial Officer, Jason Rekate, Global Head of Corporate Banking, Gustavo De Rosa, General Manager of the Finance Department and Chief Financial Officer at the Inter-American Development Bank (IDB), Cailin Birch, Global Economist at The Economist Intelligence Unit and Tom Wipf, Alternative Reference Rates Committee (ARRC) Chair and Vice Chairman of Institutional Securities at Morgan Stanley.
During her speech, Al Mashat stressed the need to restructure international programs, which are priced according to the current interest (Libor), after reaching an alternative reference interest rate, agreed upon by all stakeholders.
Al-Mashat said that the world has tens of millions of contracts priced according to the current reference interest rate (Libor), and since the world is required to achieve a transition from the current interest rate by the end of December 2021, it has become necessary to have a clear vision about the impact of this transfer on global contracts.
“There is a need to ensure that contracts contain sufficient provisions and clauses to cover global events and changes, and address them, and also ensure that the prudential market strategies are appropriate to the current conditions or need to be changed to mitigate the risks surrounding this transition," she added.
She emphasized on the importance of consensus, as “we all face similar challenges in transitioning out of LIBOR”, such as dealing with many different stakeholders and creditors, calling for effective communication and coordination between the World Bank and multilateral development banks to make the transition process easier and smoother for all countries.
It is worth noting that the World Bank Annual Meetings began last Thursday, with Minister Al Mashat participating in several events, including the Governors Interventions of the Arab Memorandum 2020 with the International Monetary Fund and the World Bank, in addition to the Ministerial Conclave on Investing in Human Capital.
Anchola Kant, Managing Director and Head of the Financial Sector of the World Bank, addressed an official letter to the Minister of International Cooperation, expressing her gratitude for the Minister’s participation in the session related to the discussion of the reference interest rate “LIBOR”.
The Minister of International Cooperation will continue her participation in several additional meetings and panels in the Annual Meetings this week, which include the G-24 meeting, and a panel discussion on Closing the Gender Gap the gender gap. LIBOR, which stands for London Interbank Offered Rate, serves as the globally accepted key benchmark interest rate that indicates borrowing costs between banks and pricing of international financial transactions.