Remittances from Egyptians abroad continued their upward pace at the start of the year, rising 83.2% y-o-y to USD 2.9 bn in January — the highest figure ever recorded during the month — according to a statement from the Central Bank of Egypt. The numbers are similarly positive in the longer term, with the first seven months of the current fiscal year having seen an 81.0% y-o-y increase in remittances to some USD 20 bn.

Remittances are also expected to continue increasing throughout the year, with Morgan Stanley forecasting USD 32 bn in inflows by the end of the fiscal year. Economist Mona Bedair expressed a similar outlook in comments to EnterpriseAM, telling us that “remittance inflows are likely to remain strong throughout 2025, especially in the early months, supported by the solid recovery that began in the second half of 2024.

“The primary driver behind this resilience remains the restored confidence in Egypt’s official exchange rate channels, backed by the government’s continued commitment to a flexible exchange rate regime,” Bedair told us. “This policy anchor has proven critical in absorbing external shocks and re-aligning incentives for formal remittance flows,” she added.

The rise or fall of remittances is no small matter, with money sent from abroad expected to have made up around 8% of the country’s entire GDP in 2024, up from 5.0% in 2023 and 6.1% in 2022. Their contribution to current account inflows is also sizable, expected to account for 35% of inflows in 2024, up from the 25% recorded the year prior.

This could be the year remittance flows surpass their pre-FX crisis peak. Last fiscal year saw remittances hitting only USD 22.1 bn as the parallel market pushed remittance flows through unofficial channels, down from a USD 31.4 bn peak in FY 2020/21. The uptick in remittances through official channels only began in March 2024 with the float of the EGP, which effectively put an end to the parallel market.

But the trade war could spell trouble for our Egypt bound remittances, as falling oil prices take their toll on the GCC — our biggest source of remittances. “It seems that the trade war and oil price fluctuations may affect remittances from Egyptians working abroad, especially since most Egyptians work in the oil-rich Gulf countries,” economist Hany Abou El Fotouh told us. Bedair added that “This is especially relevant as Gulf countries reassess the pace and financing of their diversification efforts, which could impact both oil and non-oil sector employment.”

Although, not everyone is convinced, including EGBank board member Mohamed Abdelaal, who told us that the short- and medium-term outlook is positive, tariff war or not. Abdelaal argued that there’s little global appetite for a fall in oil prices, chief among which are OPEC and OPEC+ nations who are expected to “reduce daily production in proportion to overall demand, to maintain price stability.” China likewise has little desire for a recession that involves falling oil demand and the US is being pressured by domestic shale producers to keep prices at a reasonable level to cover high extraction costs, he added.

The demographic make-up of Egyptian workers in Gulf states should also give us reassurance, Abdelaal told us. Egyptian workers in Gulf states and more broadly are “distinguished by their diverse categories and income brackets,” with high-income workers expected to maintain high salaries and the larger segment of workers in lower paid work “whose incomes are already limited and difficult to reduce.”

And even with a potential shortfall in remittances, this will be offset by increased demand for Egyptian workers — especially in Gulf states with industrial development plans, Iraq, Libya, and some European nations, including Germany, Abdelaal said.

However, exchange rate fluctuations risk scaring off remittance flows, with an air of uncertainty about where the EGP will settle potentially leading some to be discouraged from sending money over in the fear that it could soon lose value after being converted into EGP, Abou El Fotouh said.

Lowering interest rates could likewise decrease remittances from Egyptians working abroad through official channels, Abou El Fotouh told us. He explained that when interest rates on local currency deposits decrease, Egyptian expats may have a lower incentive to convert their savings into EGP, and they might prefer to keep them in foreign currency or look for investment prospects with higher returns abroad or through unofficial channels.

Abou El Fotouh suggested a number of directives from the government that could ensure the continued flow of remittances, including “improving the confidence of Egyptians in the banking system by developing banking services, facilitating transfers through banks, and reducing transfer fees,” as well as working to strengthen incentives for workers abroad by offering attractive returns on remittances.

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