Against the backdrop of the Russia-Ukraine conflict, outflows of "hot money" — funds controlled by investors seeking short-term returns, often moving money between countries to profit from varying interest rates — have triggered massive demand for the greenback in Egypt, making another devaluation of the pound a necessity.

Although outflows of hot money should come as no surprise as fund managers opt for safe havens in times of crisis, there are concerns about an exodus from emerging markets, including Egypt, which may face a number of financial and economic challenges in the short and medium terms.

“This is natural, given the growing tensions between Russia and Ukraine. Investors withdraw from emerging markets and shift their money elsewhere,” Hanan Ramses, an analyst at Cairo-based El-Horreya Brokerage, told Al-Monitor.

“Certainly, such selloffs pose risks to the foreign reserves as well as the local currency, which may be devalued by up to 15%. Although the capital outflows have been expected," she said, the Central Bank and Egyptian Exchange should take steps to mitigate its impact.