I think you were being scammed.
this post was submitted on 22 Jun 2023
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No, it's fairly common in many countries. Foreign currencies (namely USD and EUR) are a lot more stable and people prefer that. USD was the unofficial main currency for any large purchases (like a car or a house) in the Soviet union and for several years after its collapse.
In addition to the stability, they might also be trying to avoid paying currency conversion fees themselves. They are going to export the profits in dollars, and they’d rather you pay the 2% conversion tax than them having to do it.
Welcome to Egypt. You were being scammed and people will often try to do that to you. Research local prices before buying anything
How does this scam work? Is it based on the assumption that tourist won't know the exchange rate and can be easily (and presumably grossly) overcharged?
I don't think its too uncommon for tourist areas to try to pressure tourists to pay with foreign currency that has a favorable exchange rate to the local currency. That way they can make extra money by quoting a figure in USD (or other currency) that they know they can exchange for much more than the regular cost in local currency. If pressured with "I don't have USD, so its either local currency or I go elsewhere" they'll usually give in and accept local currency.
It's funny that I see people saying that they do this to make ekstra money by giving bad exchange rates, while my personal experience in Burma/Myanmar (maaany years ago) was that you got a better price in USD, because the local currency was less stable. So people would charge more if you payed in local, because of the increased risk in holding local currency vs. USD.
If you're in Cairo, go to the American Express office inside the Nile Hilton. You'll be able to get USD there.