Egyptian Pound Undervalued by 30%, Says Goldman Sachs

Goldman Sachs urges a short position on USD/EGP, forecasting further gains for the Egyptian pound, amid improving macroeconomic indicators and rising market confidence in the North African Country.

In a newly released report, Goldman Sachs has declared the Egyptian pound (EGP) is significantly undervalued—by approximately 30%—and has reiterated its recommendation to short the U.S. dollar against the pound, citing improving fundamentals and market sentiment.

On his part, economist Hany Genena explained that Goldman Sachs had recommended investors engage in a carry trade strategy by selling U.S. dollars in forward contracts against the Egyptian pound.

Genena pointed out that the one-year future dollar contract is currently trading at around EGP 58, which represents a spread of approximately EGP 8.5 over the spot rate — a difference of roughly 17%.

He added that this approach offers investors an opportunity to profit, provided the actual exchange rate remains below the forward rate over the year.

For example, if the dollar stabilizes at EGP 49.5 after one year, the investor would:

Sell the forward dollar at EGP 58, and buy the same dollar later from the spot market at EGP 49.5, to realize a profit of EGP 8.5 per dollar

Genena noted that this mechanism mirrors the returns of investing in local debt instruments, such as treasury bills, but without the need for direct purchases or currency conversion into those instruments.

The American investment bank emphasized that the recent strengthening of Egypt’s foreign reserves and a sharp turnaround in the banking sector’s net foreign asset position are crucial tailwinds for the local currency. As of May 2025, net foreign assets had swung to a $4.8 billion surplus, a stark reversal from a $17.6 billion deficit recorded at the beginning of 2023.

Since Egypt’s March 2024 devaluation, the pound has maintained a stable trajectory. Goldman noted the disappearance of the parallel market premium—a persistent challenge in previous years—as a key indicator of renewed investor confidence in Egypt's exchange rate policy.

“The narrowing gap between the official and parallel exchange rates signals restored credibility in monetary management, despite ongoing geopolitical tensions in the region,” the report stated.

According to the bank’s valuation models, the EGP is now the second most undervalued currency among frontier markets, and is expected to remain so by around 25% over the next 12 months—provided the current spot rate holds.

Goldman Sachs has therefore renewed its Short USD/EGP recommendation, targeting a 5% return, with a stop-loss threshold set at -2.5%. The move reflects growing optimism in Egypt’s ability to sustain foreign investment inflows and macroeconomic stability.

As of Thursday’s trading session, the official rate for the U.S. dollar stood at EGP 49.36 for buying and EGP 49.50 for selling, according to the Central Bank of Egypt. The highest rate was recorded at Crédit Agricole at EGP 49.41/49.51, while the lowest was at Housing and Development Bank at EGP 49.35/49.45.

This comes as Egypt's Prime Minister Mostafa Madbouly confirmed the government’s commitment to settling $1.4 billion in overdue payments to foreign oil companies by the end of 2025, further boosting investor confidence in Egypt’s external obligations.

With portfolio investment flows rebounding and FX reserves on the rise, analysts suggest that the pound could outperform regional peers if current trends persist—marking a potential turning point after years of currency turbulence.

Egyptian Pound