5/23/2024
Alexandria- The issue of buying and selling goods and services in dollars (dollarization) raises controversy in Egypt from time to time, as it violates Egyptian law, which prohibits dealing in anything other than the local currency within the country.
With the beginning of the summer season, controversy was renewed this time in the North Coast region, which is one of the most prominent tourist destinations in the country after it turned into an arena for the phenomenon of dealing in dollars in many financial transactions, instead of the Egyptian pound, whose value against hard currencies decreased by 40% with… The last float, as the price of the dollar in banks was 31 pounds, until early March 2024, before it fell to slightly less than 47 pounds currently.
During the recent period, many citizens found themselves trapped in a parallel world dominated by the dollar after advertisements spread by companies and brokers offering to sell or rent housing units in dollars, instead of pounds, and promotion escalated on social media platforms and applications for units offered for rent, whose owners ask for payment. In foreign currency or its equivalent in Egyptian pounds.
According to local newspapers, members of the Egyptian Parliament warned of the consequences of the spread of this phenomenon, which leads to economic crises within the Egyptian market, while one of them submitted a briefing request to the Prime Minister and the Minister of Finance, regarding the spread of the phenomenon of selling products in the local market in foreign currencies instead of their national currency. Or (dollarization).
The breadth of the phenomenon
Safi Sorour, owner of a medical supplies company, told Al Jazeera Net that he and his family want to enjoy spending a summer vacation on the North Coast, but he faces a challenge related to the way of dealing with the lessors, due to their insistence on collecting their dues in dollars instead of Egyptian pounds, which exposes him and his family to additional financial challenges. Adding that the green currency is almost the prevailing currency as a currency of value in various financial transactions.
He pointed out that the phenomenon is expanding despite the fact that the pound is the official and only currency that must be used in Egypt, according to the applicable laws, which dealers ignore.
Sorour adds that with more searching for units whose owners accept payment in the local currency, he finds someone who is compassionate to the situation of those wishing to rent, and who accepts payment in Egyptian pounds, but at the equivalent of the dollar exchange rate.
Naji Muhammad, a manager in a private company, and one of the tenants of the summer units, told Al Jazeera Net that he was exposed to a similar situation, and that there is a response to the tenants’ requests, which require purchasing dollars at a high exchange rate, currency conversion procedures, and paying additional fees, which adds a burden to his own budget, in addition to To obstruct some of his work, which requires hard currency, which he hardly provides from official or informal banks.
He added: One of the negative effects of the repercussions of this phenomenon is that it negatively affects the purchasing power and financial stability of individuals, and the lessee bears the risk associated with currency market fluctuations and the semi-periodic and disproportionate rent increase, while the lessor is protected from these risks.
On the other hand, the director of a real estate marketing and development company confirmed to Al Jazeera Net – who refused to publish his name – that dealing or pricing units in dollars is the decision of the unit owners, and the majority of them consider that this approach enhances financial sustainability and provides them with protection from economic fluctuations and inflation, given the high costs of each… From maintenance, management, security, guarding and facilities.
He explained that the high demand, compared to the limited supply of distinctive units on the North Coast, leaves the tenant with limited options, and forces him to agree to pay in dollars, especially if he wants units with high quality services and infrastructure.
He pointed out that their main goal is to open the door to tenants from outside the country, foreign tourists and other Egyptians who want to spend their vacation on the North Coast, and this is what increases the owner’s ability to achieve positive returns, enhances investments in coastal villages, and contributes to their development and modernization of facilities. And surrounding services, thus benefiting the state and society, and creating new job opportunities.
Negative effects
For his part, Egyptian lawyer Hani Fahim says that Egyptian law explicitly prohibits purchases and sales between citizens using foreign currencies outside the banking sector, given the significant impact that this could have on the local currency.
He adds that the Egyptian Banking Law punishes people who use foreign currencies instead of the Egyptian pound in buying and selling operations within the country, with fines ranging between 10,000 and 20,000 Egyptian pounds ($214 to $428).
He continued in a recent interview with Al Jazeera Net that negative effects on society arise in the North Coast region due to dealing in the dollar, which leads to an exacerbation of the gap between the rich and the poor, so that enjoyment of high-value services and goods becomes limited to the wealthy who own the dollar, and thus a large segment of society is excluded. Social inequality worsens.
In turn, the economist and professor of economics at the Arab Academy of Maritime Transport, Dr. Ali Al-Idrissi, warned of the escalation of the phenomenon of “dollarization,” not only in real estate, but in many financial transactions.
He considered that this phenomenon leads to undermining financial stability in the country and disrupting the exchange market as a result of the influx of foreign currencies outside the banking sector, which contributes to renewed black market activities and its negative effects on the Egyptian economy.
Al-Idrissi told Al-Jazeera Net that the most important reason for some citizens’ insistence on dealing in foreign currencies is the continuous fluctuations in the exchange rate of the pound. The Egyptian currency has witnessed a noticeable deterioration in recent years, which led to a decline in its purchasing power and an increase in economic turmoil in the country, and prompted more confidence in the dollar. Being a stable currency with global power.
What does the law say?
In turn, Islam Al-Gazzar, spokesman for the Consumer Protection Agency, confirmed that dealing in foreign currencies (other than the Egyptian pound) in the buying and selling of products and goods in Egypt is considered a violation and criminalized by the law.
Al-Gazzar explained, during media statements, that companies inside Egypt are not allowed to receive money in dollars from Egyptian citizens, and if people are spotted deliberately dealing in dollars in selling products outside the excluded sectors, the perpetrator of the incident will be referred to the prosecution, which will immediately investigate the facts and issue a Its decision, according to its opinion, violates the Central Bank Law, which stipulates that this type of dealing is punishable by imprisonment for a period of up to 3 years.
He pointed out that there are some limited exceptions to this decision, such as some hotels and establishments located in free zones, adding that some violating cases were monitored, such as selling cars in foreign currencies, and these cases were referred to the Public Prosecution for investigation and punishment according to the law.
The agency’s official spokesman indicated that there are ongoing attempts by some merchants to circumvent the decision to ban dealing in foreign currencies in the local market, and that the agency’s work team monitors many cases of selling goods and services in dollars or euros, and takes deterrent measures against these violators.
