USD Nears 60 EGP Mark in Egypt’s Black Market

The US Dollar is set to break the EGP 60 mark in Egypt’s black market, which stood at EGP 57 per 1 USD, according to an Ahram Online at the start of the week.

The official exchange rate, maintained around EGP 30.80 per 1 USD since the Central Bank of Egypt’s last devaluation in January 2023, stands in stark contrast to the escalating rates in the parallel market.

Other black market exchange rates include 1 Euro trading at EGP 63.7, 1 British Pound trading at EGP 73.9, 1 Saudi Riyal trading at EGP 15.5, and 1 Chinese Yuan trading at EGP 8.1.

Simultaneously, gold prices, which are relatively linked to the dollar’s value, are also experiencing record-breaking increases in Egypt – currently hovering near EGP 3,900 (USD 126) per gram of 24-carat gold.

Exactly a month ago, on 17 December, a gram of 24-carat gold was sold in markets for around EGP 3300 (USD 106).

THE ECONOMIC IMPLICATIONS OF THE BLACK MARKET IN EGYPT

The black market, or parallel market, operates beyond government-supervised channels to circumvent taxes and price controls.

Encylcopedia.com, one of the world’s leading digital encyclopaedias, states that the term emerged after World War I when trade occurred in secret away from the regulations imposed by central banks.

Whether money, weapons, drugs, or even essential commodities, the black market consists of any products or services that are difficult to attain legally through conventional channels.

In Egypt’s case, citizens approach the black market to buy US dollars since its value keeps increasing, in contrast with the weakening Egyptian pound.

Government and bank-mandated limitations – like removing international transactions from debit cards and limiting certain credit cards to USD 50 (EGP 1545) per month – further pushed citizens to depend on the black market to purchase foreign currency.

The limitations, imposed as an attempt to combat the country’s foreign currency shortage crisis, inadvertently elevate the significance of Egypt’s parallel market. Black market traders, who fix prices based on demand, increase the cost of the US Dollar against the Egyptian Pound as demand grows.

With three devaluations since October 2022, and a fourth imminent sometime this year, Egypt continues to struggle to narrow the gap between the Egyptian pound’s value in the black market and official exchange rates.

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