Contradicting previous expectations, Egyptian expatriate remittances from abroad recorded an increase of $3.3 billion in the first nine months of the last fiscal year to $21.5 billion and up from $18.2 billion a year earlier, an increase of 18 per cent.
According to balance of payments figures, more than 50 per cent of the increase was registered during the third quarter of the fiscal year ending in March.
During the first three months of 2020, remittances rose by $1.7 billion to record $7.9 billion, up from $6.2 billion during the same period last year and despite the effects of the coronavirus on the global economy, said the Central Bank of Egypt (CBE).
Noeman Khaled, a macroeconomic analyst at Arqaam Capital, an investment bank, said that Egyptian expatriate remittances had increased due to the fact that people tended to keep their money safe in their homeland at times of crisis to avoid abrupt economic decisions in the country where they work.
The majority of Egyptian workers abroad leave their families at home. When the pandemic struck, these families needed more money, much like individuals and companies the world over, so the remittances had increased, Khaled added.
The stability of the local currency and the 15 per cent high-yield deposit certificates the National Bank of Egypt and Banque Misr had offered in the domestic market had wetted expatriate appetites to transfer more money to Egypt instead of locking up money in foreign currency deposit accounts, he added.
Remittances are not expected to remain high, however. The coronavirus pandemic and oil prices have receded since July, and the high-yield deposit certificates were cancelled last week.
The rise in remittances from abroad had helped to absorb the shock caused by the country’s investment income deficit and the decline in the surplus of the balance of services, said the CBE. According to the country’s balance of payments performance between July and March of 2019-2020, the services surplus shrank by 13.7 per cent to $8.4 billion.
Remittances recorded $2.9 billion in July, reaching a total of $17 billion for the six months from January. This is higher than the $15.7 billion recorded during the same period in 2019. Remittances reached $25.2 billion in the previous fiscal year 2018-19.
The figures are contrary to expectations from international institutions such as the World Bank, which had forecast that Egyptian expatriate remittances would drop by 21.5 per cent in 2020 as a result of the coronavirus pandemic and plummeting oil prices.
Banking expert Hani Abul-Fotouh believes the remittances had increased due to the fact that many Egyptians who lost their jobs in the Gulf during the crisis had received their dues before their final return to Egypt.
If the remittances continue flowing at the same rate until the end of the year, Egypt’s balance of payments deficit will shrink and its foreign reserves will rise, he added.
CBE Governor Tarek Amer earlier stated that Egyptians’ remittances had recorded $34 billion during the calendar year, though the balance of payments may show a smaller figure. Many Egyptians bring cash home from aboard, which is not registered as remittances in the balance of payments, but the CBE notes it when they deposit the cash, Amer added.
Mohamed Abu Basha, a senior macroeconomic analyst with EFG Hermes, an investment bank, said the majority of Egyptians working abroad were not temporary labourers whose incomes could be affected by the pandemic or changes in oil prices.
Many other countries had also recorded increased remittances from their expatriates working in the Gulf countries, he noted.
The fact that expatriates typically end their contracts in the Gulf countries and cash their dues, often large sums of money, before returning home for good may have caused the rise in remittances, Abu Basha said.
He pointed out that several Gulf countries, including the UAE and Kuwait, had been inclined following the coronavirus outbreak to terminate the contracts of foreign workers. Kuwait, for example, has set quotas for foreign labour, he added.
The effects of the Gulf layoffs would appear in the last quarter of this year and the first quarter of the next, he said.
Sally Mikhail, head of research at the news website Arabiya Online, agreed that the final return of Egyptians and transfer of their assets to Egypt had increased remittances. Aside from the effects of the coronavirus, the Gulf countries have developed a tendency to employ their own nationals and decrease foreign labour, she said.
*A version of this article appears in print in the 1 October, 2020 edition of Al-Ahram Weekly under the title: Bringing the money back home