Egypt's Steep Increase in Money Transfers
In a significant turnaround, remittances sent by Egyptians abroad to their homeland have soared by 32.4% in the first seven months of 2024, reaching a record $15.5bn. This positive development follows a period of decline, marked by decreased tourism, job losses, rising inflation and interest rates, the Russia-Ukraine war, and supply chain challenges.
The surge in remittances has been a welcome relief for Egypt, which has been struggling with a foreign currency shortage. Some Egyptian banks have even restricted foreign currency transactions due to the shortage. To address this issue, Egypt raised interest rates by an unprecedented 6% and floated its currency, the Egyptian pound, in March 2024. This move was part of a deal with the International Monetary Fund (IMF) increasing its proposed loan to Egypt from $3bn to $8bn.
The main competitors or key players controlling inbound remittances to Egypt are a mix of established Money Transfer Operators (MTOs), banks, and emerging digital remittance platforms. However, recent years have seen a significant diversion of remittances from official channels to informal or parallel channels due to economic factors like currency exchange fluctuations and foreign currency shortages in Egypt.
Egypt remains a significant receiver of inbound remittances globally. In response to the foreign currency shortage, the Egyptian government has been introducing initiatives to boost remittances from Egyptians living abroad, such as new high interest dollar savings certificates that incentivize saving in USD with high returns.
In Q2 2024, quarterly remittances showed a 62% growth, marking the most significant quarterly growth in remittances Egypt has seen in the last few years. The Central Bank of Egypt (CBE) reported that remittances from Egyptians abroad surged by 87% Year-over-Year (YoY) in July 2024, reaching $3bn.
Egypt signed a €7.4bn ($8.1bn) migration deal with the EU in March 2024. Despite declines during the pandemic, Egypt continues to be a significant player in the global remittance market. The case of Egypt demonstrates the potential exposure of emerging players to FX challenges during periods of economic upheaval.
[1] "Egypt's Remittance Market: A Market Analysis," Remittance Insights, 2023. [2] "Blue Remit Expands to Egypt," Blue Remit Press Release, 2024. [3] "New Partnerships Boost Remittances to Egypt," Remittance Insights, 2024.
- The surge in remittances to Egypt has been a focus of interest in the financial sector, as it indicates a potential market sizing increase within the industry, with Egypt remaining a significant player in the global remittance market.
- To further boost remittances and tackle the foreign currency shortage, Egyptian banks and government have been exploring various strategies, such as introducing high interest dollar savings certificates and partnering with digital remittance platforms, which may impact the business models of established Money Transfer Operators (MTOs) and banks in the industry.
