Egypt launches Risk-Free-Rate Benchmark CONIA

EBRD supported introduction of new benchmark that strengthens market resilience

The Central Bank of Egypt has launched a new risk-free interest rate benchmark that will support the development of a more efficient domestic money market.

The new benchmark, the Cairo Overnight Interbank Average (CONIA), was developed by the Egyptian Money Market Contact Group (MMCG), which brings together the central bank, commercial banks and the European Bank for Reconstruction and Development (EBRD).

CONIA reflects rates on interbank transactions that are virtually risk free because of their very short tenors.

Rami Abulnaga, Sub-Governor for Markets and External relations at the Central Bank of Egypt, welcomed the introduction of CONIA as “an important milestone to support monetary policy implementation reform”.

EBRD Treasurer Axel van Nederveen said it made an important contribution towards the development of the Egyptian financial markets. Similar Risk-Free Rates had already been taken for major currencies in other monetary jurisdictions, he noted.

The transparency and robustness of the benchmark will support the development of a broader set of products for financial sector participants and improve the resilience of the capital markets and the overall economy.

The Egyptian Money Market Contact Group was set-up in 2018 to promote safe and efficient local currency money markets.

Following the introduction of CONIA, the group will now focus on developing instruments that will use CONIA. It will also work to enhance domestic money markets and to ensure that CONIA continues to provide an accurate reflection of underlying market conditions.

The central bank launched CONIA today at a workshop in Cairo that also included a panel discussion on international reforms to the London Interbank Offered Rate (LIBOR), led by the EBRD.

Egypt is a founding member of EBRD. Since the start of its operations in Egypt in 2012, the Bank has invested close to €5 billion in 93 projects in the country. 2018 was a record year for the Bank in Egypt, when it was the largest EBRD country of operations in terms of new commitments.

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