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Egypt Remittances
The coincidence of the infitah and the upward jump in
oil prices in the mid-1970s led to enormous labor emigration to the
oil-producing Arab states, as well as to what became the largest
source of foreign exchange: remittances. Egyptians had already been
working in many of these countries but only in small numbers and
usually as professionals and skilled workers. The sums they sent
back home were modest; in 1970 recorded remittances were estimated
at around US$30 million.
In 1986 the government estimated the number of Egyptians
working abroad at 3 million. They included large numbers of
unskilled workers, but there were also many skilled workers or
professionals. Iraq hosted the largest number, sometimes estimated
at 1 million. In part, the flow of Egyptian workers into Iraq was
stimulated by its war with Iran, which required the drafting of
large numbers of men of working age. The overall number of
Egyptians working in Arab countries was thought to have decreased
as a result of the drop in oil prices in the second half of the
1980s.
Analysts disagreed on both the amount and the actual impact of
remittances on the economy. For instance, remittances were
estimated in the early 1980s at between US$3 billion and US$18
billion. The reason for the discrepancy was that workers often
remitted earnings to their families by hand, not through official
banking channels. They were prompted to do so by the instability
and official overvaluation of the Egyptian pound and by the fact
that many workers were illiterate or had limited education and felt
uneasy dealing with banks.
The avoidance of official routes gave rise to a hidden or
invisible economy, controlled by intermediaries and money dealers
who profited from exchange-rate differentials. Some analysts
suggested that the presence of this economy, depending on its size,
might invalidate calculations about such factors as the balance of
payments, the GDP, and the government's ability to carry out
particular exchange policies.
Recorded remittances fluctuated over time, not always
reflecting the income of expatriate workers. According to some
estimates, remittances fell to about US$1.94 billion in 1982, from
about US$2.86 billion in 1981. The decline was probably caused by
the uncertainty generated by the assassination of Sadat in 1981.
Remittances recovered subsequently and in 1984 reached
approximately US$3.93 billion, a record high. The combination of
instability in the Persian Gulf and the collapse in oil prices
caused remittances to fall again; in 1988 they stood at about
US$3.39 billion.
Egyptian analysts and policy makers believed that a large pool
of savings kept by migrant Egyptian workers and others either
flowed abroad or never flowed home and that it vastly exceeded
remittances. The sums they cited ranged from US$40 billion to US$70
billion. Attracting these funds to improve the balance of payments
position might require improving the investment atmosphere and
opportunities, raising interest rates, and simplifying exchange
transactions. As one incentive, the government in 1986 offered tax
exemptions on bonds it intended to sell in foreign exchange.
The future of remittances depended on many factors. In Iraq
stirrings surfaced in late 1989 against the presence of large
numbers of Egyptian workers. The events prompted high-level
contacts between the two governments and the intervention of the
Iraqi president to reassure the workers. In addition, because the
construction boom in the Persian Gulf had ended, the Gulf
countries, for social, political, and economic reasons, would
hesitate to welcome many newcomers. According to one estimate,
remittances could perhaps grow at a real annual rate of 1 to 2
percent after 1990.
Data as of December 1990
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