Black market mark-ups show true pain of US dollar pegs

London

ONLY on the streets of cities like Cairo, Abuja or Tashkent can you gauge just how much pressure developing countries are under to ease controls on their currencies.

Individuals and businesses in five nations across central Asia, the Middle East and Africa are paying anywhere from 4 per cent to 136 per cent more than official exchange rates to get their hands on US dollars, according to a Bloomberg survey. So-called black markets flourish at times when there is a shortage of greenbacks and are one indicator of how much a currency should be allowed to depreciate to reach its fair value.

Central banks that uphold pegs have been under strain after tumbling commodity prices and slowing global growth weakened currencies from Brazil to Russia by at least 18 per cent in the past year. In the four months that followed China's shock devaluation of the yuan in August, Kazakhstan, Argentina and Aze…