The US dollar has depreciated against the Egyptian pound since last week, recording a loss of LE0.61. The fall began on 12 May, with the currency losing more than LE0.05 per day. It was trading at LE49.8 on Tuesday.
Mohamed Hassan, managing director for Specialised Investment Funds at Alpha Financial Investments Management, said the pound had appreciated against the dollar on the back of improved hard currency inflows.
A team from the International Monetary Fund (IMF) was in Cairo this month for the fifth review of the country’s $8 billion Extended Fund Facility (EFF) loan, and completing this review paves the way for Egypt to receive a further tranche of $1.2 billion.
Remittances from Egyptian expats have increased. In February, they more than doubled for the 12th consecutive month, rising to $3 billion and up from $1.3 billion in February 2024. Between July and December 2024, remittances from Egyptians working abroad surged by 80.7 per cent to $17.1 billion compared to $9.4 billion during the same period of the previous fiscal year.
On 19 May, the European Council reached a provisional agreement with the European Parliament to grant €4 billion of macro-financial assistance (MFA) to Egypt. The assistance is part of the Strategic and Comprehensive Partnership signed between Egypt and the EU in March 2024.
Another factor that has contributed to the depreciation of the dollar against the pound is that Egypt is no longer under pressure to repay Gulf deposits after Kuwait and Qatar announced their intention to convert these into investments, Hassan said.
Prime Minister Mustafa Madbouli said in April that Kuwait will inject more investments into Egypt as part of an agreement between the two countries and efforts to resolve various obstacles.
The agreement, Madbouli added, includes the conversion of Kuwaiti deposits held at the Central Bank of Egypt (CBE) into investments, in addition to pumping more capital into several projects.
Also in April, President Abdel-Fattah Al-Sisi was in Doha to seal a deal with Emir of Qatar Sheikh Tamim bin Hamad Al-Thani to inject $7.5 billion worth of investments into the Egyptian economy.
However, despite these factors Hassan does not see the dollar’s depreciation journey lasting for long, expecting it to fall to LE49.5 against the pound before picking up an upward trajectory when foreign investors sell their holdings in Egyptian treasury bills as interest rates gradually drop with the CBE’s monetary easing.
Mohamed Abu Basha, chief economist at EFG Hermes, said the dollar had fallen as a result of US President Donald Trump’s agreement with China, which has bolstered investor confidence globally, affected markets positively, and increased investors’ demand for treasury bills.
On 12 May, the Trump administration and China agreed to slash trade tariffs for 90 days.
Abu Basha pointed to a link between regional and global events and the rise and fall of the dollar. Tensions in the region would lead to an appreciation of the dollar against the pound, he explained.
Banking expert Moetaz Hamed said foreign investors’ appetite for Egyptian treasury bills was the main reason behind the pound’s strength, estimating that between $500 and $700 million has recently flowed into the sector.
Egypt’s banks have also succeeded in renewing foreigners’ investments in treasury bills, resulting in net foreign inflows.
Hamed expects the dollar will keep on falling throughout the year with the pound not losing ground before the first quarter of 2026 when most maturing obligations owed to foreign investment banks, estimated at over $25 billion, are scheduled for repayment.
If these obligations can be rolled over, the dollar’s exchange rate is likely to remain stable.
* A version of this article appears in print in the 29 May, 2025 edition of Al-Ahram Weekly
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