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Marketplace Morning Report

Egyptians turn to ‘gray market’ for dollars

Julia Simon Apr 11, 2013
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The Egyptian economy is teetering. Since the revolution two years ago, the main-stay tourism industry has struggled, and the amount of foreign currency in the country is drying up. Egypt relies on foreign currency, particularly the U.S. dollar, to subsidize cheap fuel and bread for its people. So now the Egyptian government is telling banks they can no longer sell dollars.

Before the revolution, when there were still lots of tourists and investors in Egypt, the country’s foreign reserves were $36 billion. Today they are less than $13.5 billion. So dollars are scarce in the traditional places, but on the street, it’s a different story.

Just blocks from the Cairo stock exchange, you see men looking back and forth nervously, repeating one word under their breath to passers-by: “Zarafa, zarafa, zarafa…”

Exchange, exchange, exchange, they say. If you have dollars they will buy and sell them, for a premium. My friend Hossam Minnea has 1,000 bucks to exchange and within minutes of us walking onto the street, Hossam is handed 7,200 Egyptian pounds — about a 6 percent premium over the official exchange rate.

I ask Hossam if he got a good deal. He sighs, “It’s a good under the table, but in general, for my country — it’s not a good deal!”

Hossam says the fact he can get this deal so easily on the street is a sign of just how bad things are in Egypt. Everyone I spoke to for this story knows someone who is going into the gray economy to get dollars. 

The guy buying Hossam’s dollars isn’t some shady crook. He’s an importer of toys from China and he needs dollars to get his shipments. He started working the informal exchanges on the streets a month ago.

In a wealthy neighborhood on the other side of town, the Genghiskhan Chinese Restaurant now has big sign on the wall announcing, “We are buying USD!” Yu Shikuh’s family owns the restaurant. She says they’re paying a premium of about 3 percent over the official exchange rate.

Yu needs the dollars to send to her mom in China. Her mom is using the cash to buy food and supplies for a new restaurant in Cairo, including a new karaoke machine. Yu says at the same time her family needs to pay extra for dollars, they’re make less profit on the restaurant because rising inflation has pushed food price higher.

While I was talking to Yu the power went out in the restaurant. It’s part of rolling black outs the government is staging because it doesn’t have the foreign currency to buy enough imported fuel for power stations.  

Yu gathers some candles and starts putting them on the tables.

Despite all the problems Yu says she and her family plan to stay in the country, but like many Egyptians, she wonders how much worse it will get, before it gets better. 

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