Egypt’s minister of international cooperation and governor of Egypt at the World Bank Rania Al-Mashat said that restructuring international programmes linked to inter-bank interest rates (Libor) is needed along with an alternative reference interest rate agreed upon by all stakeholders.
Al-Mashat made her comments during her participation in the high level discussion organised by the World Bank Group (WBG), as part of the International Monetary Fund (IMF) and WBG 2020 annual meetings, entitled "Beyond Libor: Are we prepared?” focusing on potential global risks as Libor is expected to be discontinued during 2020 and 2021.
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.
She noted 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.
“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 prudential market strategies are appropriate to current conditions or need to be changed to mitigate the risks surrounding this transition," she added.
Al-Mashat called for effective communication and coordination between the WBG and multilateral development banks to make the transition easier and smoother for all countries.
Al-Mashat is expected to participate in several additional meetings and panels during the annual meetings this week, which include the G-24 meeting, and a panel discussion on "Closing the Gender Gap."
Libor, which stands for the London Interbank Offered Rate, serves as the globally accepted key benchmark interest rate that indicates borrowing costs between banks and the pricing of international financial transactions.