Egyptian pound slides to record low but analysts say panic is unwarranted

Egypt's pound hit a record low of 56.2 per US dollar on October 26, marking a 15% depreciation this year and surpassing Capital Economics' projection of 55 per dollar. The weakness stems from rising global energy prices, which raise net energy imports to about 4% of GDP and have widened one outlet-account deficit to 5.1% of GDP in the second quarter. Additional concerns include potential involvement in the Saudi-Houthi conflict, which could hurt tourism revenues.

A weaker currency pressures inflation, now at 13.9% year-over-year, and raises the cost of foreign-currency debt, though high real interest rates and a 5% primary budget surplus provide cushioning. The Central Bank of Egypt's reserves rose to $57.35 billion in September, and the consultancy expects the bank to hold rates rather than hike at its October 29 meeting. Capital Economics forecasts the pound to finish 2027 around 60 per dollar if energy prices ease.