The Egyptian pound has surpassed the symbolic 50-to-the-dollar mark, closing at 50.0024 on Thursday, marking its weakest level since March, according to the central bank.
This milestone comes as the pound faces mounting pressure ahead of substantial maturities of treasury bills (T-bills) held by foreign investors, alongside other looming financial obligations.
Since Egypt secured an $8 billion International Monetary Fund (IMF) financial package in March, the pound has largely hovered below 50 per dollar. Under the IMF deal, Egypt committed to a market-determined exchange rate, but recent events have strained the currency’s stability.
Treasury Bill Maturities Add Pressure
Heavy foreign investment in Egypt’s nine- and 12-month T-bills after the IMF agreement is now creating challenges. With maturities concentrated in December and March, demand for dollars could surge if investors repatriate funds. Over 1 trillion pounds in T-bills are due for repayment in each of these months, according to central bank data.
Analysts are watching whether investors will reinvest in new T-bills or exit due to concerns over the pace of economic reforms. “If inflation slows as we expect in February or March, it could incentivize foreign investors to invest in longer-term bonds,” said James Swanson of Capital Economics.
However, foreign investors have already been active in the secondary market this week, selling T-bills maturing in March, according to a broker.
IMF Reforms and Investor Confidence
Sri Virinchi Kadiyala of Abu Dhabi’s ADCB emphasized that investor confidence hinges on visible progress in reform efforts. “We sense fatigue within the government regarding further subsidy reforms, particularly those that could raise living costs,” Kadiyala noted.
An IMF team recently concluded a review visit to Cairo, acknowledging Egypt’s “substantial progress.” However, no date has been set for the IMF board’s meeting on the program. Egypt also faces a $933 million repayment to the IMF later this month.
Inflation and Money Supply Challenges
Rapid money supply growth has added to the pound’s woes, fueling inflation and undermining confidence in the currency. Egypt’s M2 money supply grew by 29.59% year-on-year as of September, compared to just 2.6% in the U.S.
Before the IMF agreement, the central bank maintained a fixed rate of 30.85 pounds to the dollar, causing severe foreign currency shortages and disruptions to critical imports.
The current exchange rate reflects both market adjustments and the lingering challenges of implementing promised reforms.
