Egyptian pound under pressure from rising energy import costs

Egyptian pound under pressure from rising energy import costs | AGBI
June 10, 2026
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Egyptian pound under pressure from rising energy import costs
By
Matt Smith
June 8, 2026 7:41 AM
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A petrol station worker with a handful of Egyptian pounds in Cairo. Egypt’s monthly energy bill doubled to $2.5 billion in March Copyright: Reuters/Amr Abdallah Dalsh
Conflict dragging on currency
Energy import bill paid in dollars
Foreigners selling treasuries
Rising energy import costs, lower interest rates and foreign investor sales of government debt have caused Egypt’s currency to weaken over the past four months, easing from mid-February’s two-year peak.
The pound’s prospects are uncertain, with much depending on whether the Iran conflict ends conclusively.
Higher oil and gas prices have weakened Egypt’s current account balance due to the country’s rising energy import bill, which is paid in dollars. This, in turn, caused the pound to fall versus the dollar, said Nimrod Mevorach, an emerging markets strategist at UBS in London.
“A wider current account deficit means the country needs more dollar inflows on the financial account,” said Mevorach.
Egypt’s monthly energy bill doubled to $2.5 billion in March from $1.2 billion, the country’s prime minister said in a televised statement.
In mid-February, the pound was trading at 47 to the dollar, its best price since a March 2024 devaluation. The fewer the pounds to the dollar, the stronger the Egyptian currency.
Since then, though, the dollar has gained 11 percent, with one dollar now worth 52 pounds – albeit down from early April’s all-time peak of 55.
Egypt’s central bank has not deployed its own reserves to support the pound, although support probably came via commercial banks, whose net foreign currency position fell by $6 billion in March.
“Egypt has let the pound go, which may be a wise policy because it did not want to overspend its reserves after building them up so effectively in the last two to 2.5 years,” said Mevorach.
The pound’s slump coincides with Egypt’s central bank in mid-February cutting its benchmark interest rate by 100 basis points to 19 percent, its lowest level for three years (excel).
The reduction comes despite inflation being ascendant. Annual headline inflation had tumbled to 12 percent in September 2025 from 38 percent in September 2023. It hit an eight-month high of 15 percent in March before easing by 0.3 percentage points in April.
Lower interest rates and higher inflation reduce real interest rates, which has “led some investors to reassess their treasury bill positioning”, said Mevorach.
Foreigners’ holdings of Egyptian treasuries have increased in absolute terms but fallen as a percentage of total issuance. In 2024, 50 percent of the EGP3.6 trillion ($69 billion) of treasury bills were owned as foreigners. In January 2026, the most recent data, they held 43 percent of the EGP5.9 trillion of treasury bills.
Foreign selling of treasuries was the main cause of the pound’s decline, said Wael Ziada, founder of Zilla Capital, a Cairo-based investment bank.
“The central bank did not intervene to support the pound, despite the outflow of hot money, which was the right thing to do – it let the pound depreciate instead,” he said.
“The pound now appears to be plateauing. Providing the Iran war doesn’t restart, the pound should appreciate as the conflict comes to a conclusive end.”
Mevorach agreed that the pound’s short- and medium-term fate depends on whether Iran and the US reach a lasting peace agreement that re-opens the Strait of Hormuz, but was less optimistic about its likely direction.
Should a deal be concluded, dollar oil prices will probably fall to the low 80s per barrel.
That would help the pound strengthen “to the low 50s to the dollar”, said Mevorach. “I can’t see it returning to the 47 levels quickly even in this case, but if the Strait remains blockaded the dollar could rise to its previous highs of close to 55. The dollar has asymmetrical upside.”
That is because a prolonged impasse could lead oil prices to rise by a further $30-$40, drastically increasing Egypt’s energy import bill.
Expectations that the pound will weaken may spur Egyptians working abroad to delay sending remittances home to wait for a better rate, said Mevorach.
“Egypt’s balance of payments is very much supported by remittances,” he added.
Further reading:
Egypt’s economy shows resilience against the turmoil of war
Egypt seeks support from GCC banks for food imports
Egypt’s stock rally pauses as investors cut margin positions
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