The usefulness of remittances to the Egyptian economy is something that has been noted by successive governments since the beginning of the nation’s history as a modern republic. During the 1960s, President Gamal Abdel Nasser famously looked to the Egyptian diaspora for valuable foreign currency, appealing to the national pride of Egyptians working abroad in an effort to convince them to transfer capital back to the homeland. However, the 25% tax the government levied on such transactions overcame nationalist sentiment, and Egyptians found alternative routes by which to send money home to their relatives.
After the Nasser era, the flow of remittances increased markedly when the free-market philosophy underpinning former President Anwar Sadat’s infitah, or “open door”, economic policy encouraged middle-class Egyptians, such as doctors, teachers, lawyers and engineers, to eschew increasingly poorly paid public sector jobs and travel abroad to seek employment. This phenomenon has continued into the present era, with unskilled labourers joining labour outflow as demand for construction and service workers has risen in Gulf economies.
BENEFITS ABROAD: Research carried out by the International Organisation for Migration shows that populous countries like Egypt, Sudan, Morocco and Algeria account for half of the total Arab labour force, between them containing around 70m labourers. Furthermore, the economies of these nations share some common features: high job expectations from educated workers and reduced labour demand in generally low-paying public sector. Moreover, after decades of guaranteeing graduates employment in public sector institutions, Arab economies including Egypt have more recently undergone structural reforms aimed at boosting the private sector through privatisation programmes while shrinking the public sector through recruitment freezes. While this policy, if managed correctly, promises long-term benefits, in the shorter term economises following this trajectory often find themselves facing alarmingly high unemployment rates, as traditionally absorptive economic sectors like industry and agriculture are restructured. According to Egypt’s Central Agency for Public Mobilisation and Statistics (CAPMAS), Egypt’s unemployment rate in the first quarter of 2013 stood at 13.2%, representing a 0.2% rise on the previous quarter.
BRINGING IT BACK HOME: Remittances, therefore, are likely to remain an important part of the Egyptian economy, as workers continue to look for employment opportunities abroad. In 2012 remittances reached a record $19bn, according to Central Bank data – up from $14.3bn in the previous year. This rise is in tune with a trend that has become firmly established over the past decade, with the Central Bank of Egypt figures showing that remittances increased sixfold between 2003 and 2012.
In Egypt’s case, the remittance increase has served as a useful buffer against the drop-off in traditionally strong sources of revenue, such as that provided by tourism. With few other options to expand the revenue base and an agreement with the IMF to inject $4.8bn into the economy unlikely to be concluded, in 2012 Egypt’s government followed those that have gone before it in appealing to the national pride of its citizens working abroad. The then-governing Freedom and Justice Party’s campaign, “Your money transfers support Egypt’s economy and development” aimed to persuade Egyptian expatriates to transfer foreign currency into Egyptian bank accounts as a way of demonstrating their patriotism. Prominent Muslim Brotherhood leader and chairman of the Arab Centre for Political and Economic Research, Dr Ahmed Matar described the initiative as “a million-man demonstration indeed, but a new kind that does not take place in liberty squares, but in financial circles. It does not involve cheers, chants, flags and fiery speeches, but money transfers to Egypt.” The lessons learned during the Nasser era remain valid: economic realities dictate the scale of remittance flows, not patriotism.
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