The efforts of the Central Bank of Egypt (CBE) to abolish illegal currency trading are pushing black market dealers towards carrying out external transactions, to remain away from the reach of the law. The black market dealers’ behavior deprives the Egyptian economy of the major source of foreign currency.
Reuters reported that the black market dealers say they will accumulate dollars held by expatriate workers and exporters before they ever enter Egypt, exacerbating the dollar shortage at the heart of the currency crisis that has already undermined investment and hit trade and manufacturing.
Egyptian people working abroad, who send back about $19 billion a year, have been an important source of hard currency especially with the withdrawal of traditional sources as tourism, foreign investment, and exports resources as a result of the political turmoil.
Since the Central Bank of Egypt has strived to curb the black market dealings which are far beyond the official rate. Accordingly, the CBE launched a crackdown on the black market, and the government approved plans to impose jail terms for black market trading. But the wide gap between an official dollar rate of 8.8 Egyptian pounds and a black market rate close to 11 pounds encourages expatriates to circumvent the banks altogether, reported Reuters.
One banker, who preferred to remain anonymous, said: “It’s a vicious cycle because the only way for the black market to end is for banks to start providing dollars and the banks don’t have the dollar resources because they are being sucked up by the black market abroad.”
Reuters put a spotlight on the Egyptian expatriates who prefer to use the black market for offering a better bargain. “Abu Marwan, an Egyptian engineer who works in Saudi Arabia, used to transfer money each month to his wife’s bank back home. For the past year, he has gone instead to black market dealers who offer a better rate if he hands over his cash abroad,” reported Reuters.
Abu Marwan said, “Me and my colleagues here stopped transferring money through the banks to Egypt because when you do that you lose.” He added, “We all open a phone line and agree on the price together, then I give the man in Riyadh the money and at the same time, his partner gives my wife in Egypt the money in Egyptian pounds at a higher rate.”
In the same context, “No one sells dollars to the banks anymore. They all prefer to go to the black market which will pay them more,” said another banker. “The dollars don’t come into the banking system anymore and the central bank’s dollar reserves are not enough to support the country’s import needs.”