Will tourism revenues in Egypt compensate for the significant decline in remittances from workers abroad?

CAIRO -

The crisis of violent fluctuation in the value of the local currency (the pound) in Egypt extended to the remittances of citizens working abroad, and put an end to the steady increase in the volume of remittances, which reached a record high of $31.9 billion during the fiscal year ending in June 2022.

Remittances from Egyptians working abroad decreased by 20.9%, to record about $6.4 billion, compared to about $8.1 billion, according to what was stated in the Balance of Payments report during the first quarter (the period from July to September) of the fiscal year 2022/2023 issued by the Central Bank of Egypt.

Egypt became the fifth highest country in receiving remittances from abroad in 2021, according to the World Bank, and it constitutes a major source of the country's foreign exchange resources with exports, and represents about 7% of the gross domestic product.

The remittances of expatriate Egyptians played a major role in the availability of foreign currency in the country, even with the exacerbation of the repercussions of the Corona crisis during the year 2020/2021. The value of remittances increased steadily and amounted to $31.4 billion, making it the bet mare to compensate for the shortfall in revenues of vital sectors such as tourism, which was severely affected.

The pound and the black market

This relatively large decline was supported by fluctuations in the exchange rate, according to economic researcher Elhamy Al-Mirghani, which began after devaluation of the pound by more than 15% in March 2022, to fall to about 18.40 pounds compared to 15.70 pounds, and reached its climax with the price of the dollar exceeding 30 pounds.

And he adds to Al Jazeera Net that as a result of these sharp fluctuations and the continuous decline in the value of the pound, some Egyptians abroad preferred to postpone their transfers, or that they transferred their money through unofficial banks, that is, not through banks to take advantage of the exchange rate difference between the "central" and the black market that has emerged strongly since Beginning to devalue the pound.

Al-Mirghani indicated that some importers and traders have set up centers to collect currency in the Gulf countries, the largest source of remittances for Egyptians working abroad, in order to settle commercial deals with them, or to speculate on the price of the dollar.

The economist expected that the decline in Egyptians' remittances would continue until the dollar exchange rate stabilized against the pound and confidence was restored between these expatriates and the banking system, pointing out that the exchange rate still does not reflect the true value of the pound.

And the “Central” announced at the end of October 2022 that it would adopt a flexible rate system to exchange the value of the pound against foreign currencies, based on the mechanism of supply and demand in the market.

Remittances from expatriate Egyptians played a major role in the availability of foreign currency (Al-Jazeera)

Tourism revenue jump

Tourism revenues - during the first quarter of the current fiscal year - were better than expected, and the Central Bank stated in the Balance of Payments report that they increased by 43.5%, to record about $4.1 billion, compared to about $2.8 billion, and the number of tourists coming to the country jumped by 52.2%, to record about 3.4 million tourists.

The positive results of tourism revenues - in addition to the increase in the proceeds of petroleum and non-oil commodity exports, and the escalation of the proceeds of traffic fees in the Suez Canal - contributed to the improvement of the Egyptian economy's transactions with the outside world, and the improvement of the current account deficit by 20.2%, to record about 3.2 billion dollars.

Tourism revenues during the 2021-2022 fiscal year amounted to about $10.7 billion, taking into account the negative effects of the Russian-Ukrainian crisis, according to the Central Bank of Egypt statement.

Are you offsetting the decline in conversions?

The government says it is working on an ambitious program to increase the number of visitors to 30 million people annually, more than double the highest number Egypt achieved in its history, which is 14.7 million visitors in 2010 with revenues of $12.5 billion.

Al-Mirghani believes that the increase in tourism revenues by about $1.3 billion does not compensate for the decline in remittances from Egyptian expatriates, amounting to $1.7 billion.

Because the lesson is in the collection of revenues from all sources, on top of which are transfers from abroad.

Tourism revenues represent - in normal circumstances - about 12% of the gross domestic product, and about 15% of Egypt's foreign exchange revenues, and it is the third largest source of foreign income after exports and remittances of Egyptians working abroad.

The tourism sector in Egypt contributes to creating direct and indirect job opportunities, and the number of workers in it is estimated at about 3 million, which represents about 10% of the total work force, according to a study by the National Planning Institute in May 2020.

Tourism revenues represent, in normal circumstances, about 15% of Egypt's foreign exchange revenues (Al-Jazeera)

Reasons for high tourism revenues

Ahmed Attia, Undersecretary of the Ministry of Tourism and former head of the hotels and tourist villages sector, believes that tourism revenues during the first fiscal quarter are an indication of an increase in annual revenue, which is expected to exceed expectations with the support of lifting restrictions on travel and movement, the end of the Corona pandemic crisis and people’s desire to be free from its effects.

He adds to Al-Jazeera Net that the government's relentless efforts to attract tourists through some measures and decisions have contributed to the revival of the tourism sector, which has suffered greatly during the past few years, despite its great role in the Egyptian economy and the increase in growth rates, the provision of hard currency, and the employment of manpower.

However, Attia stressed the need to focus on increasing tourism revenues more than focusing on the number of tourists, pointing out that what counts is the generosity of the tourist, not the number, and the need to work on bringing in tourists who spend in an appropriate manner commensurate with the size and nature of the country’s tourism potential that is not available in many countries of the world, but It needs to improve the level of services.

The tourist expert questioned the feasibility of reducing the prices of services to attract tourists, because low prices mean poor service that harms Egyptian tourism, calling for competition for archaeological and cultural tourism, as Egypt has ingredients that no other country has, instead of focusing on beach tourism in which many countries of the world compete. .