UAE foreign exchange and money transfer company Al Ansari Exchange has recorded a 15 per cent to 20 per cent increase in remittances to Egypt since Monday as the most populous Arab country seeks to weather the turbulence from the Ukraine war on its economy.
“We also attribute the spike to traditional factors such as the spring break and Ramadan,” Mohammad Bitar, deputy chief executive of Al Ansari Exchange, said.
“We normally witness a rise in transactions during the Holy month as Egyptian expatriates in the UAE send more money back to their home country.”
Egypt is facing new economic headwinds following Russia’s military offensive in Ukraine, which prompted foreign investors to flee emerging markets and disrupted the global supply chain.
On Monday, Egypt’s central bank raised its key interest rates by 100 basis points in an exceptional monetary policy committee meeting. The Egyptian pound subsequently depreciated as much as 15 per cent after it had remained little changed since November 2020. On Wednesday, the currency was slightly up at 18.32 pounds to the dollar.
The first rate increase since 2017, underpinning rising international commodity prices due to the Russia-Ukraine conflict, and increased risk-off sentiment adding to external imbalances were key factors behind the central bank’s decision, Abu Dhabi Commercial Bank said in a research note.
The decisions by the Central Bank of Egypt were aimed at combating inflation triggered by the Covid-19 pandemic and the Russia-Ukraine conflict, which led to record high oil prices, Al Ansari Exchange said.
Egypt this week also unveiled an emergency $7.05 billion relief programme to soften the blow on the most vulnerable Egyptians from rising food prices. About 30 per cent of Egypt’s 102 million people live under the poverty line.
Russia and Ukraine have for years accounted for 80 per cent of Egypt’s wheat imports, which were about 13 million tonnes last year.
The war is also affecting Egypt’s tourism industry, one of the biggest sources of foreign currency for the country, as hundreds of thousands of visitors from Russia and Ukraine stay away from popular Red Sea resorts.
Egypt confirmed on Wednesday that it is seeking the support of the International Monetary Fund on a “new programme designed to support the state in its comprehensive economic reform plan”.
Meanwhile, remittances to poor and middle-income countries are projected to have grown 7.3 per cent to $589bn in 2021, the World Bank said in November.
Remittances are projected to continue to grow by 2.6 per cent in 2022, according to the lender.
Outward personal remittances from the UAE increased 8.7 per cent, or by Dh3.6bn ($980 million) a year, in the second quarter of 2021, according to the Central Bank of the UAE.
Outward remittances through banks rose by Dh6.1bn while transfers through exchange houses dropped by Dh2.5bn.