Egypt has devalued its currency, allowing it to weaken by about 35%. The pound plunged to 48.18 to the dollar in Cairo, down from around 30.9 over the past year.
This decision was made after the central bank raised its rates at an unexpected meeting and stated it would allow the market to determine the exchange rate. This boosted market confidence but is expected to weigh on a population already reeling from double-digit inflation.

The Central Bank’s Monetary Policy Committee stated it had “decided to accelerate the monetary tightening process to expedite the disinflation process and ensure a decline in underlying inflation.”
The central bank raised the benchmark interest rate by 600 basis points to 27.25%. This decision likely paves the way for an agreement with the International Monetary Fund to increase Egypt’s current loan from $3 billion to over $10 billion. The move became possible after Cairo struck a $35 billion deal last month with the United Arab Emirates to develop certain parts of the Egyptian Mediterranean coast. Authorities described it as Egypt’s largest investment commitment, surprising investors with its scale.

The devaluation brought the pound closer to its value on the black market. The IMF encouraged Egypt to tighten its monetary policy to counter near-30% inflation and adopt a more flexible official exchange rate. Egyptian bond spreads compared to US Treasury yields have narrowed significantly. The benchmark Egyptian stock index EGX30 rose up to 4.5% to reach a record high, led by gains in Commercial International Bank.

Egypt is paying the price of a geopolitical situation complicated by the conflict in Gaza. The Suez Canal, a vital source of revenue usually amounting to billions of dollars per year, has seen much of its income slashed due to Red Sea attacks, forcing many shipping companies to halt canal usage.

The question now is social: How will the majority of the population react to an austerity regime imposed on an already severely weakened country?