Egypt approves AfDB Shift to SOFR in benchmark rate overhaul

Egypt has ratified an agreement with the African Development Bank (AfDB) to replace the London Interbank Offered Rate (LIBOR) with the Secured Overnight Financing Rate (SOFR) as its benchmark for interest rates. The move aligns with a global transition away from the discredited rate.

The decision, formalised under Presidential Decree No. 605 of 2024 and published in the Official Gazette on Sunday, comes as international lenders phase out LIBOR due to its susceptibility to manipulation. SOFR, seen as more transparent and risk-free, is based on actual secured transactions in the US Treasury market.

Officials view that the switch would not impose additional fiscal burdens and aims to better align borrowing and lending costs. The move also reflects a broader global consensus led by institutions such as the World Bank, which have already adopted SOFR as a standard.

The revised framework is designed to improve pricing fairness and risk assessment across development financing agreements, Egyptian authorities added.

Attribution: Amwal Al Ghad English