Monday, February 4, 2013

Living a currency crisis

Throughout my SAIS years, I studied different currency crises, runs on the bank, lack of currency in the ATMs. Now I'm living it.

For months I've been reading about Egypt's draining currency reserves: the Egyptian government no longer has dollars to finance itself. It began an auction of US dollars to banks three times a week in order to halt the depletion of its foreign currency reserves. The Egyptian government also put controls on how much people can take out of the bank in hopes of halting currency flights, but all that did was freak people out. Everyone ran to the banks to get their money out and exchange it to dollars as the value of the Egyptian pound (EGP) plummeted.  Speculation--an economists nightmare--is that the value of the pound will continue to depreciate, from 6.7ish right now to 7 to even 8.

The value of the pound has lost nearly 8 percent of its value since December 30, 2012--man, I wish I took out all my money before Christmas--and has lost 13.4 percent of its value since the fall of Mubarak.

Political instability--looting of international chain hotels, riots, protests, stealing Army tanks, political violence--certainly isn't helping the situation.

A few weeks ago my boss went to the bank to try to get USD for her son, who is living abroad. The bank did not have--DID NOT HAVE--dollars (In better times, Egyptian banks give you the option of taking out EGP or USD).  She had to take out Egyptian pounds, take it to the exchange (aka black market), and take that back to the bank to transfer to her son's account.

Another one of my friends who is a teacher here, paid in USD, had her account frozen when the government announced the new currency controls. The bank would not let her have access to her own money.

Today, I had a meeting where one of the participants had a similar experience to my boss. The bank wouldn't let her transfer the value of an EGP account to USD, even within the same bank.

All this has done is freak me out.  I pay my credit card bills in USD! Uff! I will be going to the States soon--what good will EGP be?

Today, went to the bank to try to get USD. There were none.  I took out a bunch of money, brought it to the exchange, and got a rate higher than the official rate but lower than I'm hearing many people are receiving.

The speculation, the fact that everyone is having my reaction, is undoubtedly worsening the situation.

Poor Egypt.

This is why I went to SAIS. 

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