Egyptians turn to black market for hard dollars after run on currency

By Asma Alsharif, Reuters

CAIRO–A run on Egypt’s pound has left foreign currency in short supply and driven some dealers into the streets in search of people with U.S. dollars to sell, spawning a new black market. The currency’s decline was triggered by a political uprising that swept Hosni Mubarak from power in 2011 and it has officially lost 8 percent of its value since Dec. 30. Black market rates are even weaker, a sign that although the central bank managed to stem the slide in official trade last week, Egyptians are nervous about holding on to pounds. Some dealers tout discreetly outside regulated foreign exchange bureaux and banks in Cairo, illegally offering a better rate to those looking to sell hard currency. “There are no dollars. Everyone that walks in asks for dollars but supply is scarce,” said one of the dealers.

The central bank took steps last week to manage the rate including narrowing the pound’s trading band. It was last bid at 6.71 to the dollar on Sunday in interbank trade. That is 13.4-percent weaker than its level on the eve of the uprising that led to Mubarak’s downfall, pitching Egypt into two years of turmoil that has scared off tourists and investors. On Cairo’s streets, one dealer offered to sell U.S. dollars at a rate of 6.95 on Thursday — 3.5-percent weaker than the official price. Another asked for 6.89 pounds to the U.S. dollar. The pound’s decline has been reflected in a drop in Egypt’s foreign reserves, which fell to US$13.6 billion at the end of January — below the US$15 billion level needed to cover three months’ imports. The reserves stood at US$36 billion on the eve of the uprising against Mubarak. Complicating a business climate already weighed down by political unrest, some importers say they are having to source their foreign exchange needs from what they call the parallel or open market. One senior executive at an Egyptian company that imports goods from abroad said companies were able to source their U.S. dollar needs from the black market, but forecast that supply would tighten further in the coming weeks. “Corporates are not having problems arranging for U.S. dollars from the open market. However, there is a spread that ranges between 16 to 20 piasters between the bank rates and the open market,” he said. Speaking on condition of anonymity because he was discussing an illegal market, he forecast that U.S. dollar supply would dry up further because of factors such as political uncertainty. “What will happen? Most probably you will start seeing products disappearing from supermarket shelves,” he said. “The challenges that we are facing now are nothing compared to what we could be heading to.” Central Bank Governor Not Worried

Central bank governor Hisham Ramez has said he is not worried about the emergence of a black market.

Bonook El Youm, a weekly supplement published by the financial daily Al-Alam Al-Youm, quoted him as saying he is confident the authorities have the tools to eliminate it completely.

There is no sign of dealers being targeted by the police.