Goldman Sachs has said the Egyptian pound remains undervalued, estimating the currency’s fair value at around EGP 43 against the US dollar and expecting it to strengthen gradually over the coming year.

In a recent report on the economies of Central and Eastern Europe, the Middle East and Africa, the bank said the pound is undervalued by between 13% and 15% based on the real effective exchange rate index, suggesting there remains room for further appreciation in the period ahead.

The report noted that improved geopolitical conditions in the region, following the extension of the ceasefire agreement between the United States and Iran, have supported the Egyptian currency. The pound has gained more than 4% against the dollar since mid-June and is up more than 9% from its lowest levels during the period of escalation.

Goldman Sachs expects the dollar to trade at EGP 49 over the next three months, before declining to EGP 48 after six months and EGP 46 within 12 months.

The bank attributed its outlook to improving external financing conditions and a projected decline in Egypt’s current-account deficit to 2.5% of GDP starting in fiscal year 2027/2028. The improvement is expected to be supported by lower energy imports and a recovery in Suez Canal revenues.

The report also forecast that Egypt could maintain annual external financing of around $27 billion, driven by stronger foreign direct investment, despite an expected decline in portfolio flows and financing linked to International Monetary Fund programmes.

Goldman Sachs linked the outlook to a narrowing current-account deficit, improved foreign direct investment, and continued accumulation of foreign exchange reserves, which reached around $70 billion by the end of May.

However, the bank cautioned that persistent inflation, potential declines in foreign inflows, and expected interest rate cuts in 2027 could limit the pace of the pound’s appreciation. It stressed that continued economic reforms and fiscal discipline will remain critical to supporting the stability of the Egyptian currency.