Market sources: Egyptian pound fluctuates after foreign investors pull at least $2 bn from Egypt’s debt market

Amid global market turbulence caused by United States President Donald Trump’s new tariff regime, foreign investors withdrew between US$2 billion and $2.25 billion from Egypt’s government debt market last week, according to three anonymous sources with knowledge of the matter.

The drop in liquidity created downward pressure on the value of the Egyptian pound against the dollar, causing it to drop from around LE50 to around LE51.

The majority of the outflows, worth around $1.1 billion, occurred during the first portion of last week and were primarily pulled out of Egypt’s sovereign bonds, which are longer-term government financing instruments, according to a senior official at a financial firm with ties to the government.

The head of a debt securities trading company, who also spoke on condition of anonymity, confirmed that most of the pullback was concentrated in government bonds rather than short-term treasury bills.

By the end of the week, the pace of withdrawals had slowed, according to a member of the Egyptian Stock Exchange (EGX) board, who said the deceleration helped steady the pound’s exchange rate against the dollar and eased demand.

Foreign investors typically exit the market through the EGX’s secondary trading platform, converting their holdings into foreign currency before transferring funds abroad. This process often leads to higher demand for dollars in the banking system.

The pound peaked at LE51.63 against the dollar on Wednesday last week before dropping back down to around LE50.97 at the time of writing.

During a press conference last week, Prime Minister Mostafa Madbuly directly linked the drop to investors’ withdrawals.

The degree of short-term fluctuation in the pound’s valuation is new to the market, after years in which the Central Bank of Egypt maintained control over the currency through periodic, staged devaluations.

The EGX board member pointed to the pound’s price flexibility as a factor in calming investor sentiment, noting that as the currency stabilized, the urgency for capital flight eased.

The International Monetary Fund’s fourth review for Egypt in March — under its $8 billion Extended Fund Facility loan — urged the country to remain “vigilant” to ensure the “true flexibility” of its exchange rate, in line with its broader economic policy conditions.

But the pound’s depreciation continues to erode the value of local-currency returns for foreign investors — a key attraction of Egypt’s sovereign debt market.

When converting earnings back into dollars, foreign investors will now receive less due to the currency’s decline.

This concern is expected to factor into the central bank’s upcoming monthly meeting to determine interest rates.

The pound’s weakening also affects Egyptians more broadly, as purchasing power diminishes with each drop in value.

The government’s reliance on liquidity sourced from often volatile foreign investment in its bond market — known as “hot money” — has caused substantial economic turbulence over recent years. Former Finance Minister Mohamed Maiet had previously stated that “we learned our lesson,” affirming at the time that the state intends to reduce foreign investors’ net contribution to its debt portfolio.