By Producer
NBC News
updated 1/20/2004 12:22:59 PM ET 2004-01-20T17:22:59

"For Five Thousand you could be a Millionaire," read a headline in Al Akhbar, Egypt's most popular newspaper. The daily was not trumpeting the promise of easy money but warning Egyptians against the latest investment fad: speculation on the Iraqi dinar.

Because the new Iraqi currency is so weak, a mere 5,000 Egyptian pounds ($813) is enough to acquire a whooping 1 million dinars.

To the Cairo government's consternation, Egyptian investors figure they will hoard their millions of dinars until the violence in Iraq ends and the oil starts pumping again, driving the value of the currency up to pre-war, pre-embargo levels.

Then the erstwhile investors will be able to trade in millions of dinars for millions of Egyptian pounds.

Memories of fortunes made off Kuwaiti dinar
Hopeful investors recall the Kuwaiti dinar, whose value plunged during the Iraqi occupation of the oil emirate and then soared after the country's liberation - allowing Egyptian investors to cash in.

The head of Egypt's Foreign Exchange Association, Mohamed Al Abyad, said that buyers are tempted to speculate on Iraqi dinars for lack of better investment options. Now the dream of becoming a millionaire, however remote, is within the grasp of ordinary folk.

And if they lose? With so little money required, even a loss will not devastate prudent buyers.

By most accounts, the craze began north of Cairo in the Nile Delta region and quickly spread to the rest of the country. The lure of easy money has snared rich and poor alike.

At first, dinars were only available on the unofficial exchange market, or the black market. Later, two officially sanctioned financial institutions began offering the Iraqi currency to their clients, which boosted confidence.

While it is difficult to give an estimate of how many Egyptian pounds have been exchanged for Iraqi dinars on the black market, the leap in the value of the Iraqi dinar reveals the extent of demand.

Within months, the value of the dinar tripled.

Already, some of the bigger investors have cashed in, causing the dinar to tumble, currency dealer, Abdel Fatah, said.

Many smaller investors were stuck, as the dinar plummeted to where it is now, at just under double its original value.

Government cracks down on black market
Demand has continued to slacken after semi-official newspapers launched a media campaign against speculation and the government cracked down on currency smugglers.

In just two reported incidents last week, authorities confiscated $50,000 in Iraqi dinars at Alexandria airport and another $38,000 in Luxor airport.

The head of Egypt's Foreign Exchange Association, Mohamed Al Abyad, estimates one billion Iraqi dinars have already been brought into the country.

While Egyptian law does not ban the import of foreign currency, those entering the country are only allowed the equivalent of $10,000, which must be declared upon entry.

Egyptian newspapers discouraged potential buyers with articles quoting financial experts who explained many risks. A member of the bank union called it "an unpredictable gamble," explaining that the currency has no announced price on the international market and is not convertible. Nobody knows the dinar's real value, Egyptians have been warned, and the bills might be counterfeit.

'Law doesn't protect the stupid'
The general manager of the Egyptian American Bank admonished, "The law doesn't protect the stupid. As much as there is a high return, there is expectation for harsh losses."

Dr. Ahmed Galal, director of the Egyptian Center for Economic Studies warned that the situation in Iraq is far from stable. "Resistance is continuing, the Iraqi government is not guaranteed and internal differences could expand."

Others contended Iraq is deep in debt and the oil industry requires a massive investment in order to recover. A Central Bank governor advised citizens against investing in a currency issued by an occupational authority which could be cancelled when a legal Iraqi government is formed.

Al-Abyad of the Foreign Exchange Association said the government fears that Egyptians will invest their savings in dinars rather than Egyptian savings accounts.

The press reports have taken their toll. "Now after the media campaign, the demand is near zero," Abdel Fatah said.

In the past few days, the Egyptian American Bank (EAB) and an official money exchange also have ceased trading in the dinar. The EAB insisted it was an internal decision. Central Bank officials said there are no clear instructions to stop dealing in dinars.

Yet despite the naysayers, some investors are still happy they took the plunge. A used car dealer who purchased 20 million dinars is glad he did. He plans to cash in once the dinar recovers.

Al Abyad advised buyers not to expect any benefits in the short term and warns "Don't buy so much so that you lose a lot."

But even he would like to buy a couple of million, "so that later on there will be millions," of something.

Even for a hard-bitten cynic, it's hard to resist being a millionaire, if in name only.

Charlene Gubash is an NBC News producer based in Cairo.

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