Last October, we entered Egypt by ferry from Jordan and started our adventure in a quaint coastal town, Dahab (which translates to gold in Arabic). It is famous for its Red Sea activities especially freediving as it's home to the infamous Blue Hole (a sinkhole 130m deep). Locals consider it the perfect getaway from the hustle and bustle of Cairo, and foreigners enjoy the nomadic life it provides.
We quickly learned about the USD exchange rate disparity at the bank versus the street. (1 USD = ~31 EGP at the bank but 37 EGP on the street). This disparity steadily increased during our two-month stay, 41 EGP ➝ 43 EGP ➝ 48 EGP. Economic issues causing this included capital controls, a USD shortage, inflation, and more. This street rate reached as high as 70 EGP in 2024.
As an Egyptian, this meant walking into a bank and not having access to USD or only a limited amount, your credit card could be restricted to foreign usage and ATMs had low limits. During our stay, it was normal to encounter ATMs that were out of cash resulting in long lineups at other locations, a common sight in many cities.
Here are some anecdotes from the locals we met:
-A chef and small restaurant owner has dealt with produce prices increasing threefold since opening her restaurant six years ago. She now has the option to increase her prices, reduce her food quality, or go out of business.
-A scuba-diving shop owner who owes his suppliers (mostly European) in euros as his local currency freefalls. He prefers being paid in US dollars or euros and is nearing the stage of applying a premium when a customer pays in Egyptian pounds.
-An Airbnb host who stores his value in cars because the Corolla he purchased a year ago is worth 35% more now.
In a country plagued with economic issues, bitcoin is a perfect fit, but unfortunately, it is illegal in Egypt. We had to be fairly hush-hush when talking about bitcoin with merchants. The majority of them were open to the idea of accepting bitcoin but feared the repercussions of doing so. That said, we paid for a cold plunge workshop, a custom shirt, and a stay at an Airbnb with bitcoin.
We left Egypt not knowing what economic outlook awaits for a country with such a rich history. In March 2024, an additional $5 billion loan was taken from the IMF (expanded to $8 billion), and the interest rates rose by 600 basis points! This led the EGP to be devalued by ~35% leading to an exchange rate of 1 USD = 48 EGP at the bank and reaching parity with the reality on the streets. Since then the foreign currency restrictions and ATM withdrawal limits have been loosened easing some pressure off the locals. Time will tell how this all plays out.
Ethiopia is up next.
Sources:
https://www.reuters.com/world/middle-east/egypt-raises-interest-rates-by-600-bps-pound-tumbles-2024-03-06/
https://www.lonelyplanet.com/egypt/sinai/dahab/attractions/blue-hole/a/poi-sig/1429824/355262