HSBC Sees Egypt’s Pound Gaining Investor Trust Post-Devaluation
Egypt’s pound is gaining the trust of foreign debt-investors who likely won’t be deterred if the nation makes deeper interest-rate cuts, according to ’s chief regional economist.
More than 20 months since authorities let the currency weaken 40% and vowed it would reflect market forces, “portfolio investors’ fears have dimmed” of any return to a policy of propping up the pound, said Simon Williams , who covers the Middle East, Africa and central and eastern Europe for the lender.
The pound “may still not flex as much as other emerging and developed markets currencies, but it’s clearly much more market-driven than the past,” Williams said in an interview in Cairo, after an economist roadshow. “There’s debate over what fair value for the EGP might be, but not over convertibility and that makes it a much easier market for them to trade.”
The North African nation’s currency is changing hands at about 47.7 per dollar compared with 31 before a March 2024 devaluation designed to tackle the worst foreign-exchange crunch in a generation. Combined with record-high interest rates, that encouraged overseas investors to return to the local debt market, even as they keep a close eye on the pound’s performance.
Egypt has borrowing costs this year, yet retains one of the world’s highest inflation-adjusted interest rates — 8.5% — ensuring that debt has attractive returns. While the central bank held steady last week, Williams says there’s still scope to cut without denting the appeal.
“Most investors I speak to trade Egypt with the assumption that rates are coming lower,” said Williams, who said real rates could comfortably settle at around 6% in the current post-crisis phrase.
Lowering beyond that is possible, but “will require both the global environment to be supportive and the new policy framework to have gained further credibility,” he said. There’s no publicly available data on how much local Egyptian debt is held by foreign investors.
Williams also said:
