4 ms·

Egyptian banks suspend debit card use in foreign currency

59 points by elashri 3y ago

Scoundreller 3y ago
> Debit card transactions are charged at the official rate of about 31 pounds to the dollar whereas on the black market a dollar sells for around 40 or 41 pounds. Egypt has kept its currency fixed against the dollar since March despite a widening gap with the black market rate. Doesn't sound so fixed
- from 3y ago
  It is if you have friends in the central bank. In Venezuela the official rate was like 10x the black market rate at one point so if you had the connections you could go say 60000 bolivars -> (official rate) 10000 USD -> (black market rate) 600000 bolivars -> (official rate) 100000 USD. The massive profitability of this scam resulted in a number of Miami condo sales. Reading the article: > A substantial number of debit card holders had been using cards to make bulk purchases, often in the United Arab Emirates, of gold, mobile telephones and other products to take advantage of the Egyptian pound's low official exchange rate. Looks like a similar arbitrage was going on here. I predict they will introduce more capital controls to stop bleeding forex reserves, which won't work and then they will eventually be forced to float the currency, resulting in massive inflation that will stabilize in a year or two. Or they'll just continue on like Argentina and let their economy languish because they refuse to recognize economic reality.
webninja 3y ago
> Debit card transactions are charged at the official rate of about 31 pounds to the dollar whereas on the black market a dollar sells for around 40 or 41 pounds. Egypt has kept its currency fixed against the dollar since March despite a widening gap with the black market rate. As a foreigner, it may make sense to short the Egyptian pound versus a stronger currency like the USD and potentially get rich in the same way George Soros when he bet against the British pound in 1992 which was propped up by the Bank of England then. Usually when there’s a currency arbitrage opportunity, locals will circularly exploit the currency arbitrage (potentially by exchanging pounds with an Egyptian bank for 10% more USD or perhaps another way) until the government spends more of it’s foreign reserves than it feels comfortable spending and simply can’t hold down the peg any longer.
- gruez 3y ago
  >As a foreigner, it may make sense to short the Egyptian pound versus a stronger currency like the USD and potentially get rich in the same way George Soros did. Who are you going to borrow egyptian pounds from to pull this off? The egyptian central bank certainly won't do it, and any third party is going to charge you the black market rate (ie. the true market rate), which wipes out any profits you might make. >Usually when there’s a currency arbitrage opportunity, locals will circularly exploit the currency arbitrage (potentially by exchanging pounds with an Egyptian bank for 10% more USD or perhaps another way) Usually you can't pull that off because the central bank won't sell foreign currency to just anyone. You have to have a valid reason, or be well connected.
  - yeahsure 3y ago
    We have a similar situation in Argentina, with the exchange rate being around $350 pesos but the "black market" rate around $1,000. The only way to get dollars at the official rate is to import goods from abroad, so you can pay the central back in pesos and they settle the invoice with dollars. Of course, you can only do this if you have connections, otherwise you will be waiting for a long long time (months probably) until your request is approved. EDIT: Forgot to mention that you can still use a local debit or credit card to make purchases abroad. You will have to pay around $650 pesos for each dollar. The government taxes the heck out of every purchase abroad to discourage people from spending. Still there's a gap, so people use it while they can.
    - alemanek 3y ago
      Western Union surprisingly gives the blue dollar rate here in Argentina so if you have access to a foreign bank account that is a decent way to do it. From what I can tell it tracks pretty closely to the rates on the “dólar hoy” website. On $500 transfers they charge $32.00 but you still come out ahead of the ATM or Credit Card conversion rates.
    - deleted 3y ago
      [deleted]
  - 3y ago
fsckboy 3y ago
does anybody know, was this already an ongoing Egyptian problem, or is it a result of the Gaza/Israel situation?
- coffeebeqn 3y ago
  I think the Gaza-Egypt border has been closed for some time now so probably not that
  - Scoundreller 3y ago
    only sorta: open to people (and any goods you can smuggle across!) https://en.wikipedia.org/wiki/Rafah_Border_Crossing https://en.wikipedia.org/wiki/Rafah_Border_Crossing https://www.aljazeera.com/news/2023/10/9/rafah-crossing-between-gaza-and-egypt-disrupted-by-israeli-air-raids https://www.aljazeera.com/news/2023/10/9/rafah-crossing-betw...
    - londons_explore 3y ago
      I assume that when the egyption economy collapses they may no longer be in a position to guard the border.
      - thriftwy 3y ago
        Economies do not usually collapse to that extent. You are implying that somehow Egypt will turn into Somalia-style failed state (evrn Venezuela is able to guard its borders), which will almost certainly not happen. Economy collapses are more like a reality check when a country has to cease the unhealthy practices it was engaged in, and eat a humble pie. They are not like statehood collapse.
  - fsckboy 3y ago
    Gaza has been accumulating weapons, and Israel would not allow this if they knew about it. They are least likely to come over the Israel border. There's the Egyptian border. There's the sea, or airlifting, and there are tunnels. The Israelis are going to be monitoring air and sea. Any sea operations would probably be small boats from Egypt. I think the Egyptian border, with tunnels seems the most likely.
thriftwy 3y ago
Today I've learned you can have a "currency shortage" instead of just being broke due to unrealistic, non-market exchange ratio. It's a pity that Russia has just one able-minded turkic woman with a collection of brooches[1]; we could rent out these services for a fee that would indeed compete with oil profits. 1. https://en.wikipedia.org/wiki/Elvira_Nabiullina https://en.wikipedia.org/wiki/Elvira_Nabiullina
- joeamroo 3y ago
  What services? nothing can compete with oil profits but tech profits.
frankreyes 3y ago
Argentinian economics at its best. Let's hope Egyptians come to their senses and realize that they can't get us dollars out of thin air and controls such as this will Only make it worse.

59 points by elashri 3y ago

from 3y ago
It is if you have friends in the central bank. In Venezuela the official rate was like 10x the black market rate at one point so if you had the connections you could go say 60000 bolivars -> (official rate) 10000 USD -> (black market rate) 600000 bolivars -> (official rate) 100000 USD. The massive profitability of this scam resulted in a number of Miami condo sales. Reading the article: > A substantial number of debit card holders had been using cards to make bulk purchases, often in the United Arab Emirates, of gold, mobile telephones and other products to take advantage of the Egyptian pound's low official exchange rate. Looks like a similar arbitrage was going on here. I predict they will introduce more capital controls to stop bleeding forex reserves, which won't work and then they will eventually be forced to float the currency, resulting in massive inflation that will stabilize in a year or two. Or they'll just continue on like Argentina and let their economy languish because they refuse to recognize economic reality.

> Debit card transactions are charged at the official rate of about 31 pounds to the dollar whereas on the black market a dollar sells for around 40 or 41 pounds. Egypt has kept its currency fixed against the dollar since March despite a widening gap with the black market rate. As a foreigner, it may make sense to short the Egyptian pound versus a stronger currency like the USD and potentially get rich in the same way George Soros when he bet against the British pound in 1992 which was propped up by the Bank of England then. Usually when there’s a currency arbitrage opportunity, locals will circularly exploit the currency arbitrage (potentially by exchanging pounds with an Egyptian bank for 10% more USD or perhaps another way) until the government spends more of it’s foreign reserves than it feels comfortable spending and simply can’t hold down the peg any longer.

gruez 3y ago
>As a foreigner, it may make sense to short the Egyptian pound versus a stronger currency like the USD and potentially get rich in the same way George Soros did. Who are you going to borrow egyptian pounds from to pull this off? The egyptian central bank certainly won't do it, and any third party is going to charge you the black market rate (ie. the true market rate), which wipes out any profits you might make. >Usually when there’s a currency arbitrage opportunity, locals will circularly exploit the currency arbitrage (potentially by exchanging pounds with an Egyptian bank for 10% more USD or perhaps another way) Usually you can't pull that off because the central bank won't sell foreign currency to just anyone. You have to have a valid reason, or be well connected.
- yeahsure 3y ago
  We have a similar situation in Argentina, with the exchange rate being around $350 pesos but the "black market" rate around $1,000. The only way to get dollars at the official rate is to import goods from abroad, so you can pay the central back in pesos and they settle the invoice with dollars. Of course, you can only do this if you have connections, otherwise you will be waiting for a long long time (months probably) until your request is approved. EDIT: Forgot to mention that you can still use a local debit or credit card to make purchases abroad. You will have to pay around $650 pesos for each dollar. The government taxes the heck out of every purchase abroad to discourage people from spending. Still there's a gap, so people use it while they can.
  - alemanek 3y ago
    Western Union surprisingly gives the blue dollar rate here in Argentina so if you have access to a foreign bank account that is a decent way to do it. From what I can tell it tracks pretty closely to the rates on the “dólar hoy” website. On $500 transfers they charge $32.00 but you still come out ahead of the ATM or Credit Card conversion rates.
  - deleted 3y ago
    [deleted]
- 3y ago

fsckboy 3y ago

does anybody know, was this already an ongoing Egyptian problem, or is it a result of the Gaza/Israel situation?

coffeebeqn 3y ago
I think the Gaza-Egypt border has been closed for some time now so probably not that
- Scoundreller 3y ago
  only sorta: open to people (and any goods you can smuggle across!) https://en.wikipedia.org/wiki/Rafah_Border_Crossing https://en.wikipedia.org/wiki/Rafah_Border_Crossing https://www.aljazeera.com/news/2023/10/9/rafah-crossing-between-gaza-and-egypt-disrupted-by-israeli-air-raids https://www.aljazeera.com/news/2023/10/9/rafah-crossing-betw...
  - londons_explore 3y ago
    I assume that when the egyption economy collapses they may no longer be in a position to guard the border.
    - thriftwy 3y ago
      Economies do not usually collapse to that extent. You are implying that somehow Egypt will turn into Somalia-style failed state (evrn Venezuela is able to guard its borders), which will almost certainly not happen. Economy collapses are more like a reality check when a country has to cease the unhealthy practices it was engaged in, and eat a humble pie. They are not like statehood collapse.
- fsckboy 3y ago
  Gaza has been accumulating weapons, and Israel would not allow this if they knew about it. They are least likely to come over the Israel border. There's the Egyptian border. There's the sea, or airlifting, and there are tunnels. The Israelis are going to be monitoring air and sea. Any sea operations would probably be small boats from Egypt. I think the Egyptian border, with tunnels seems the most likely.

thriftwy 3y ago

Today I've learned you can have a "currency shortage" instead of just being broke due to unrealistic, non-market exchange ratio. It's a pity that Russia has just one able-minded turkic woman with a collection of brooches[1]; we could rent out these services for a fee that would indeed compete with oil profits. 1. https://en.wikipedia.org/wiki/Elvira_Nabiullina https://en.wikipedia.org/wiki/Elvira_Nabiullina

joeamroo 3y ago
What services? nothing can compete with oil profits but tech profits.

frankreyes 3y ago

Argentinian economics at its best. Let's hope Egyptians come to their senses and realize that they can't get us dollars out of thin air and controls such as this will Only make it worse.