Dealing with dollars

Reem Leila , Thursday 14 Mar 2024

Last year the black market was the main source of dollars for importers and businessmen. Dive straight into the market's perspective through a talk to purchasers and sellers for their take on the latest dance with the dollar.



The decision on 6 March by the Central Bank of Egypt (CBE) to float the national currency, leaving its price to be determined by market forces and injecting billions of dollars into the banking sector, made the dollar parallel market obsolete.

The Russia-Ukraine war had hit the economy hard on the back of an inflated import bill, as well as the decline in foreign currency resources and the fleeing of $20 billion of portfolio investments. The banking sector could not fulfil the demand of importers on the dollar, causing a backlog of imports stuck at ports. These include food, medicine, and animal feed in addition to production input and semifinal products. The absence of these items led to a substantial increase in prices as well as slowing down production at hundreds of factories.

Throughout the past few months, many businessmen resorted to acquiring foreign currencies at very high prices from the parallel market to be able to import their products, according to Mamdouh Al-Kilan, a businessman.

“Dollars were not easy to get. We usually buy them from Egyptians returning from abroad as well as some rich Sudanese who recently entered the country” seeking safety from the ongoing hostilities in Sudan,Al-Kilan said.

“Sudanese were for a while the main source of dollars in the black market since they have large amounts. They used to exchange the dollars they have at high rates,” Al-Kilan said.

He added that businessmen used to exchange names of currency dealers that they confide in. “It was not easy to get foreign currency, especially after the decree issued by the government penalising foreign currency traders.”

Article 233 of the Central Bank and Banking Law of 2022 stipulates that anyone who deals in foreign currency outside authorised banks or entities licensed for that purpose, shall be jailed for between three to10 years, and fined at least LE1 million, and up to LE5 million.

Mohamed Riad, head of sales at a private import and export company,said the company used to resort to the black market when banks could not provide the company with the dollars needed to pay for the imports. He also used to get dollars from goldsmiths he knows.

“It was not easy to collect the amounts needed from foreign currency traders as the price of the dollar was jumping every day. It reached LE72 in the black market while it was for LE30.9 at the banks,” Riad said.

“We used to buy dollars at very high prices from the black market and sell them to the banks at the official rate, thus incurring huge losses.”

Lotfi, a foreign currency trader who declined to reveal his permanent job or full name, told Al-Ahram Weekly that floatation prices of all foreign currencies were skyrocketing as the demand was more than what was available in the market. “Many people were buying foreign currency as sort of an investment, and many have benefited from skyrocketing prices,” Lotfi said.

According to Lotfi, people were buying dollars insanely even if they did not need them. “Housewives and ordinary employees were buying dollars, betting on hikes on its value.”

Lotfi used to buy dollars from Arabs visiting the country and from expatriates.

The black market is currently stagnant as traders are in a wait-and-see mode. The price of the greenback in the black market is the same at banks, according to Lotfi.

Mohamed Afifi, who deals in real estate, said he had to more than once buy foreign currency from the black market to pay for the social media campaigns promoting his projects.

He said he hopes things will be different after the recent floatation. “I expect to get what I need in foreign currency from banks though not all banks are currently providing the required amounts,” he said.

“Within the coming few weeks, foreign currency will be available for businessmen in banks,” Afifi said.“If not, we will resort to the black market again.”

* A version of this article appears in print in the 14 March, 2024 edition of Al-Ahram Weekly

Short link: