Official vs Black Market Exchange Rates: What's the Difference?
When a country has currency controls, you will often see two prices for the same currency pair: the official rate and the black market (parallel) rate. They can be dramatically different. Here is what you need to know. At a Glance Feature Official Rate Black Market Rate Set by Central bank or government Supply and demand in informal markets Legal status Legal for all transactions Usually illegal or restricted Availability Limited, often rationed Available (at a premium) Typical spread N/A (it is the benchmark) Can be 20-200% above official Where used Government accounting, formal trade Everyday purchases, remittances, travel Why the Gap Exists Governments often keep official rates artificially strong (overvalued) to make imports cheaper or to project stability. But this creates a shortage of foreign currency because: ...