Dual Exchange Rate

A dual exchange rate system is one in which the same currency has more than one official rate at the same time, each applied to a different class of transaction. A common design gives imports of essential goods, or official debt service, a preferential rate while other transactions clear at a second, weaker one; the split is set by regulation and enforced through the banking system rather than emerging from trading. Systems like this appear where authorities want to ration scarce foreign exchange without formally devaluing, and the arithmetic that follows is what makes them hard to work with. There is no single number that is the exchange rate: a price quoted in that currency means different things depending on which rate the transaction settled at, and published statistics converted at one rate are not comparable with those converted at another. Data vendors and brokers must therefore choose a rate to quote and disclose which one, and a quote offered without that disclosure is ambiguous.