Arab Finance: Goldman Sachs has estimated the fair value of the Egyptian pound at around EGP 43 per US dollar, expecting it to continue strengthening to EGP 46 per USD over the next 12 months, according to the bank’s latest report.
The report highlighted that the Egyptian pound remains undervalued by roughly 13%–15% relative to its historical averages based on the real effective exchange rate (REER), indicating that there is room for a further hike in its value.
Moreover, the investment bank projected the exchange rate to hit EGP 49 per dollar in three months, EGP 48 in six months, and EGP 46 by the end of the 12-month forecast period.
The positive outlook was attributed to easing geopolitical tensions in the region, as the US-Iran ceasefire agreement helped stabilize conditions in the Gulf and restore trade flows through the Strait of Hormuz.
This contributed to the pound's gradual appreciation of more than 4% against the dollar since the agreement was signed on June 14th. The currency has also rebounded above 9% from its weakest levels recorded during the conflict.
Goldman Sachs forecasts Egypt's current account deficit to retreat to around 2.5% of gross domestic product (GDP) by fiscal year (FY) 2027/2028, driven by lower energy import costs and the recovery of Suez Canal revenues.
The report also expects foreign direct investment (FDI) inflows to partially offset declining portfolio investments and reduced financing linked to International Monetary Fund (IMF) programs, which will maintain total external financing at nearly $27 billion annually.
However, Goldman Sachs warned of several challenges that could limit the currency's value in the short term, including the potential decline in foreign capital inflows over the next twelve months, with foreign portfolio investments reaching pre-war levels and Egypt unlikely to pursue a new program with the IMF.
The bank also warned that elevated inflation could constrain further gains in the currency, while an anticipated interest-rate easing cycle beginning in 2027 may reduce the attractiveness of Egypt's local debt market for foreign investors.
In a recent report, Goldman Sachs indicated that the Central Bank of Egypt (CBE) is likely to raise interest rates by 2% at its upcoming May and July meetings.
