The Government of Tunisia and the World Bank signed on Friday a Master Derivatives Agreement that will allow the Government of Tunisia to use a range of hedging products linked to existing World Bank loans to assist Tunisia in reducing its currency and interest rate risks. The agreement was signed by the Tunisian ambassador in Washington, His Excellency Hatem Atallah and World Bank Vice President and Treasurer, Graeme Wheeler. Commenting on this agreement, Graeme Wheeler said, “Tunisia will have access to valuable tools for sovereign debt management. Prudent use of hedging products can strengthen government risk management and help reduce vulnerability to financial shocks.”

This is the first time the World Bank has entered a Master Derivatives Agreement with one of its member countries. The newly signed agreement would enable the Government of Tunisia to access a range of hedging products offered by the World Bank, including currency swaps, interest rate swaps, caps and collars and, on a case by case basis, commodity swaps. In working toward an agreement, the Tunisian government was able to rely on support from the World Bank’s Treasury staff in considering the legal and technical aspects associated with the World Bank’s hedging products, within the government’s broader financial management framework.

The hedging products offered by the World Bank allow borrowers to use standard market techniques to transform the risk characteristics of their outstanding World Bank loans. In providing these financial products, the World Bank stands between market institutions and its borrowers, entering separate financial contracts with each of them. Borrowers therefore benefit from financial terms that reflect the Bank’s own AAA credit rating. The World Bank uses one of the standard derivatives agreements published by the International Swaps and Derivatives Association, Inc. (ISDA) (the ISDA Master Agreement – Multicurrency - Cross Border), as documentation for clients’ hedging transactions.

For more information, please contact Issam Abousleiman, 202-458-0865.