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Egypt finds itself grappling with severe economic ramifications as a crucial source of revenue, the Suez Canal, witnesses a drastic decline in traffic. The strategic waterway, once a bustling conduit generating nearly $10 billion annually, has seen a staggering 40 to 50 percent drop in revenues since hostilities erupted, revealed Egypt’s top leader, President Sisi, at an oil conference on Tuesday, as reported by AFP.
The economic turbulence compounds Egypt’s existing financial challenges, marked by a two-decade surge in public debts due to deficit spending. The external debt breached the $130 billion mark in 2020, painting a precarious fiscal picture. The nation’s dependence on imports, particularly for food, coupled with a persistent current account deficit, has further eroded the value of its currency. Inflation hovering around 30 percent has triggered a purchasing power crisis for the population at large.
The conflict in Gaza has dealt a dual blow to Egypt’s economy. Firstly, security-conscious tourists have shied away, denting the tourism revenue. Secondly, Houthi attacks in the Red Sea, targeting vessels with even tenuous links to Israel’s allies, have prompted most prominent shipping lines, including Evergreen, to reroute away from the Suez Canal.
President Sisi’s disclosure of the Suez Canal’s revenue decline sheds light on the urgency for Egypt to continue payments to companies and partners. With economic challenges mounting, Egypt is set to receive an economic aid package from the International Monetary Fund (IMF) in the near future. Despite Egypt’s previous shortcomings in fulfilling IMF agreements, the nation’s pivotal role in regional affairs, especially amid the ongoing conflict in Gaza, positions it favorably for additional funding, according to Ishac Diwan, an economist at the Paris School of Economics.
“It’s a country that’s very important geopolitically. The war in Gaza makes it, again, very important. The war has given new momentum,” Diwan stated, emphasizing Egypt’s significance in the unfolding regional dynamics.
As the Ever Ace sails through the Suez Canal, a once common sight now dwindling, Egypt faces the pressing challenge of stabilizing its economy amidst geopolitical uncertainties. The anticipated IMF aid may offer a lifeline, yet the nation must navigate a complex terrain of economic hurdles exacerbated by the Red Sea crisis.
Source:The maritime executive
