Syed Hussein Al -Qassab
The Shura Council discusses the report of the Financial and Economic Affairs Committee on a draft law to ratify the agreement to amend the framework agreement to finance the second phase of the project to improve the transportation and distribution of water from the role station, accompanying Decree No. 68 of 2024.
The draft law aims to ratify the agreement to amend the framework agreement to finance the second phase of the project to improve the transportation and distribution of water from the Al -Dur Station, signed on July 9, 2024, where the aforementioned amendment agreement comes in order to amend some provisions of the aforementioned framework agreement, and approved by Decree Law No. 36 For the year 2022.
The committee indicated that after studying the draft law and exchanging views, it stated that the Libor Index had gradually stopped work by banks and international banks until the work was stopped permanently in September 2024, for several reasons, the most important of which is its lack of stability for its dependence on virtual prices that the banks report on The cost of its borrowing, while the Sofer Index depends on actual transactions, which gains reliability and transparency.
She explained that the interest rates are supposed to be low according to the Sofer Index compared to the Libor index, which will reduce borrowing and financing costs in the event of relying on the Sofer Index, which is an important reason that prompted the world banks to stop dealing with the Libor index and go to deal with the Sofer index.
For its part, the Ministry of Electricity and Water Affairs, the Electricity and Water Authority, stated in its views, that the Libor index reflects the cost of the unprecedented borrowing between banks, while the Sofer Index reflects the cost of the guaranteed borrowing “with guarantees such as treasury bonds”, which makes it less risky and more representative of the real market conditions .
She pointed to the existence of recommendations from institutions such as the British Financial Conduct (FCA) and the US Federal Reserve, which encouraged the replacement of the Libor index with more stable indicators. In the United States, the alternative reference rates committee recommended “Arc” from the Sofer index as a major alternative.
She emphasized that there are no additional financial costs arising from the transition from the Libor Index to the Sofer Index, where the difference is 42,826 points, and the difference may be positive, negative, or zero. “ISDA”, and it is sponsored by the electricity and water authority, according to the agreement.
