Do Remittance Inflows Increase Energy Security Risk in the Long Run?: Evidence From Selected MENA Countries

Introduction

One of the sustainable development goals (SGDs) is “affordable and clean energy.” In other words, the 7th of the SDGs is to “ensure access to affordable, reliable, sustainable and modern energy for all” (UN, 2020, p. 12). Although some progress has been made to accomplish this goal, 789 million people still lack access to electricity (UN, 2020, p. 36). One of the ways to achieve this goal, especially in developing countries, is to ensure energy security and sustainability. However, energy security that is “the uninterrupted availability of energy sources at an affordable price” (IEA, 2021), remains to be a problem in the Middle East and North Africa (MENA) countries especially in Egypt, Morocco, and Tunisia.

In these 3 MENA countries, energy consumption has been increasing sharply since 1980. In Egypt, energy use per capita rose by almost 2.4 folds from 1980 (348.5 kilograms of oil equivalent [kgoe]) to 2014 (827.49 kgoe). In the same period, Morocco experienced a more than two-fold increase in per capita energy consumption, from 270.47 kgoe in 1980 to 555.14 kgoe in 2014. Lastly, in Tunisia's experience, the increase was more than 1.85 folds; in other terms, it increased from 512.7 kgoe in 1980 to 950.5 kgoe in 2014. Furthermore, another implication of increasing energy use in these countries is the heavy reliance on fossil fuels. In 2014, fossil fuel utilization in total energy usage was 97.92% in Egypt, 88.47% in Morocco, and 88.87% in Tunisia. Of course, this situation additionally produced environmental ramifications for these countries. In 2018, compared to the 1980 values, carbon dioxide emissions rose by more than five folds in Egypt, more than four folds in Morocco, and more than three folds in Tunisia (the author's calculation based on the WDI (2021) data).

In addition, according to an energy security risk index (ESRI) that is discussed in more detail in the next section and constructed by Global Energy Institute, most of the MENA countries, exclusively Egypt, Morocco, and Tunisia, have critically high energy security risks (i.e., energy insecurities) (Global Energy Institute - International Energy Security Risk Index, 2021). Further, as shown in Figure 1, compared to the OECD average, the ESRIs of these three countries had been consistently higher since 1981. In summary, energy security seems to be a persistent problem in these countries. Achieving energy security is vital because energy security can also help maintain economic growth (Le & Nguyen, 2019; Xu et al., 2021) and socio-economic development (Naeem Nawaz & Alvi, 2018).

Figure 1.

Energy security risk indices of Egypt, Morocco, Tunisia, and the OECD average.

Source: Global Energy Institute - International Energy Security Risk Index (2021)

Also, besides high energy insecurity, another common feature of these three MENA countries is that they receive significant remittances, defined as “money sent home by migrant and guest workers employed in foreign countries” (Sayeh & Chami, 2020, p. 16). As reported by the World Bank, in 2018, remittances received equaled more than 10% of Egypt’s gross domestic product (GDP), almost 6% of Morocco’s GDP, and roughly 5% of Tunisia’s GDP (The World Bank, 2021). Moreover, remittances are considered to be a significant external financial source and income. To the extent that, on average, these countries receive more remittances than foreign direct investments (FDI), as shown in Table 1.

Notes: The numbers present the average inflows for the 1980-2018 period. Both indicators are presented as a percentage of gross domestic product (GDP). Data are obtained from World Bank (2020) and WDI (2021)