<p>Used to be capital controls. You could only buy dollars (or any other foreign currency) through official channels at the official favorable rates by providing documentation displaying need for said currency (e.g. Travel or import documents).</p>

CC BY-SA 3.0
2016-11-16T00:44:54.840Z
2016-11-16T00:44:54.840Z
tvbc
<p>Apparently Egypt uses a fixed exchange rate so there is a <a href="http://www.economist.com/news/middle-east-and-africa/21709612-government-has-finally-allowed-overvalued-pound-depreciate-egypt" rel="nofollow noreferrer">substantial difference between the government rate for the Egyptian pound and the price on the street</a>. What prevents someone from just buying pounds on the street using dollars and then depositing the pounds in a bank and converting them back to dollars at the official rate, thus allowing the person to instantly make a large profit?</p>

<p>I assume that there is some mechanism to prevent this. Is there?</p>

CC BY-SA 3.0
2016-11-04T00:52:04.963Z
Usually parallel exchange rates only happen when banks refuse to provide foreign currency at the official rate except for approved uses, which excludes pure arbitrage.  Typically this disrupts international trade. You can see articles about  Egypt's position for example at http://www.pymnts.com/in-depth/2015/an-fx-crisis-in-egypt/ and http://www.reuters.com/article/us-egypt-currency-imports-idUSKCN0WA25Y
Henry
CC BY-SA 3.0
2016-11-16T07:15:19.430Z
@Henry This is at least the fifth instance when you answer a question in a comment. If the question is good enough to answer, the answer is good enough to post.
Giskard
CC BY-SA 3.0
2016-11-16T07:16:36.363Z
Though sadly Lassie has not accepted any answers in the last 12 months.
Giskard
<currency><foreign-exchange><currency-peg><currency-exchange><arbitrage>
How does Egypt prevent people from arbitraging their currency?
Lassie Fair
# How does Egypt prevent people from arbitraging their currency?

(Asked by: username_0 on 2016-11-03)

Apparently Egypt uses a fixed exchange rate so there is a [substantial difference between the government rate for the Egyptian pound and the price on the street](http://www.economist.com/news/middle-east-and-africa/21709612-government-has-finally-allowed-overvalued-pound-depreciate-egypt). What prevents someone from just buying pounds on the street using dollars and then depositing the pounds in a bank and converting them back to dollars at the official rate, thus allowing the person to instantly make a large profit?

I assume that there is some mechanism to prevent this. Is there?

**Tags:** currency, foreign-exchange, currency-peg, currency-exchange, arbitrage
> **Comments:**
> **username_1**: Usually parallel exchange rates only happen when banks refuse to provide foreign currency at the official rate except for approved uses, which excludes pure arbitrage.  Typically this disrupts international trade. You can see articles about  Egypt's position for example at http://www.pymnts.com/in-depth/2015/an-fx-crisis-in-egypt/ and http://www.reuters.com/article/us-egypt-currency-imports-idUSKCN0WA25Y  
> **username_2**: @Henry This is at least the fifth instance when you answer a question in a comment. If the question is good enough to answer, the answer is good enough to post.  
> **username_2**: Though sadly Lassie has not accepted any answers in the last 12 months.  

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## 1 answers

### Answer by username_3 on 2016-11-16. Score: 2

Used to be capital controls. You could only buy dollars (or any other foreign currency) through official channels at the official favorable rates by providing documentation displaying need for said currency (e.g. Travel or import documents).


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