Currently in Egypt and they just asked us to pay in USD cash for an added activity but, not being American, we don’t have USD. We have the local currency and the ability to get that out at ATMs, but no way to access foreign currency. So annoying but they accepted local in the end.
I think you were being scammed.
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.
See also this map: