Egyptian remittances returning to normal as black market shrinks: PM

CAIRO – 13 March 2024: Prime Minister Mostafa Madbouli announced that remittances from Egyptian expatriates are gradually returning to their usual levels, particularly due to the narrowing gap between the official exchange rate and the black market rate.

Egyptian remittances, a major source of foreign currency to the country, dropped by 29.22 percent to $4.52 billion in the first quarter of FY 2023/2024, according to data released by the Ministry of Planning and Economic Development.

During the weekly Cabinet meeting on Wednesday, Madbouli praised the "positive outcomes" resulting from recent economic measures implemented by the state.

Last week, Egypt devalued its currency, leading to a decrease in the value of the Egyptian pound to around 48 per dollar, compared to the maintained rate of approximately 30.8 over the past year.

In the past months, Egypt faced a significant disparity between the official and black market exchange rates amid a heavily managed exchange rate.

Subsequently, Egypt suffered a lack of foreign currency and abrupt drops in the value of the Egyptian pound with the black market trading rate for the Egyptian pound exceeding 70 per dollar at one point.

These disruptions have caused inflation to soar and significantly affected investors’ confidence in the Egyptian economy.

Last week, the CBE also raised interest rates by 600 basis points (6 percent), reaching 27.25%.

Revitalizing economy

These measures were implemented after Egypt secured a $15 billion tranche of a massive $35 billion agreement with the Abu Dhabi Developmental Holding Company for the Ras El Hekma development project on Egypt's North Coast.

This represents the largest foreign direct investment (FDI) in the country's history.

Within less than two months, Egypt is expected to receive the second tranche of the Ras El Hekma deal, further revitalizing the economy with an influx of foreign currency resources.

During the Cabinet meeting, Madbouli attributed the decline in the black market to the shrinking gap between the official and parallel market exchange rates, as well as recent crackdowns by the Ministry of Interior on currency traders.

Madbouli shared that CBE Governor Hassan Abdalla informed him that banks and exchange offices have witnessed an increase in citizens exchanging dollars for the Egyptian pound in recent times.

Additionally, Minister of Tourism and Antiquities Ahmed Eissa reported an increase in tourism companies exchanging dollars for the Egyptian pound through the banking system in recent days.

Madbouli highlighted that the state successfully released stranded goods worth around $3 billion at ports in the past few days and emphasized plans to settle payments owed to foreign partners.

 

The premier commented on Moody's change of outlook on Egypt from negative to positive, stating that this paves the way for further improvement in Egypt's credit rating by the renowned company in the coming period.

Madbouli emphasized the ongoing economic reform efforts coordinated between the government and the CBE.

He commended the recent economic measures taken by the state, which have contributed to the provision of necessary foreign currency resources and attraction of foreign investments.

Following the measures, Egypt and the International Monetary Fund (IMF) announced the signing of an expanded $8 billion agreement, more than doubling the $3 billion 46-month Extended Fund Facility (EFF) loan program for Egypt agreed upon in December 2022.

Madbouli said in a press conference after the signing that Egypt will also receive $12 billion in soft loans from the World Bank and the European Union.