Although a number of Egypt’s other major revenue earners may have suffered following the ouster of former President Mubarak, foreign remittance inflows have weathered the instability fairly well, totalling roughly $14.3bn in 2011, according to the central bank.
Foreign remittances have long been one of the country’s chief foreign currency earners and one of its largest revenue sources, along with taxes and receipts from both foreign tourists and the Suez Canal. According to the World Bank, in spite of the slowdown in developed economies and the political unrest in North Africa, remittance flows to developing countries worldwide reached $351bn in 2011, up 8% from the year prior.
Egyptian remittances were not unaffected by the global economic slowdown and the strife in neighbouring Arab states, dropping by 5.2% in fiscal year 2010/11 compared to the previous fiscal year, but the relatively limited nature of the drop in volume is impressive given the broader political turmoil.
“The decline is logical, given current events in Libya and other Arab countries which caused the lay-offs and the return of Egyptian workers from there,” said Omneya Helmy, the deputy director of the Egyptian Centre of Economic Studies, speaking with local newspaper Al Ahram.
Remittances from neighbouring countries – such as Libya, from which Egyptian workers sent home an average of $33m annually – dropped as workers fled the violence, while flows from the US and Europe, which account for roughly 40% of the total volume of inbound remittance cash, decreased as economies there slowed.
According to the International Organisation for Migration (IOM), some 200,000 Egyptians have returned to the country from their employment abroad, a figure that – while not enormous itself – may be an early sign of a larger movement with the potential to slow the steady flow of remittances into the country.
"To date, nearly 200,000 Egyptian migrants have returned back to Egypt," Piera Solinas, the Cairo programme manager for the IOM, told international media. "Most are semi-skilled adult males, and were likely to have been single and/or primary breadwinners who were supporting dependents through remittances, which have now been disrupted."
However, this risk is less substantial for Egyptian remittances coming from the Gulf, which have been stable throughout the global economic crisis.
Curiously, in spite of the physical proximity between workplace and home country, the weighted average cost of sending remittances back to the Middle East and North Africa region is currently amongst the highest in the world, with transaction costs of $19 for every $200 remitted from Europe, according to the World Bank. By comparison, the weighted average cost for the South Asia remittance corridor (such as flows between the UK and India), which benefits from a greater volume and a larger number of intermediaries, is around $9.6 for every $200.
This cost-differential represents a still largely-untapped boon to the regional financial and telecoms industry, with a need for services ranging from mobile phone banking to wire transfer.
Therefore, initiatives such as one recently mooted by UAE-based telecoms provider Etisalat to provide Egyptians based in the GCC with easier access to remittance payments are welcome news.
Etisalat is seeking regulatory approval to expand its financial services in the Gulf, hoping to put new focus on expatriate workers in its home country and also in Saudi Arabia. The two countries, plus the other GCC states, are home to more than half of Egyptian remittances from the country's expatriates working abroad there.
The company – which saw more than $1.8bn move through its networks in 2011 via money transfers – is looking to offer mobile money services that allow customers to pay bills or deposit funds in foreign accounts through SMS messages. This idea is not new, of course, as other telecoms players, including local operators, offer the same services.
These transactions often end up costing less than bank wire transfers, particularly for foreign workers, who are typically unable to take advantage of more traditional systems offered by banks.
Indeed, the prospect of Egyptian workers remaining in the GCC is so strong that some groups are looking to profit off the prospect of increased demand between the Gulf and Egypt. Ras Al Kahmiah (RAK) Airways, the flag carrier of the UAE state of the same name, recently announced it was partnering with a general sales agent in Egypt, Excel Travel, to expand its offerings from Cairo's international airport. In announcing the new partnership, the company’s CEO specifically mentioned Egyptians’ growing remittances from the UAE.
While the prospect of increasing remittance flows for an emerging market such as Egypt are encouraging, it would be preferable to have all workers able to find employment locally instead of having to go abroad. Until that time, however, efforts to maintain and even grow Egypt’s remittance inflows should have a positive effect on the overall economy.