The Suez Canal, one of the world’s busiest waterways and a vital source of income for Egypt, has seen a sharp drop in revenue after a series of attacks by Yemen’s Houthi rebels diverted shipping away from the Red Sea.
The canal, which connects the Mediterranean Sea with the Indian Ocean, earned Egypt a record $8.76 billion in the fiscal year that ended on June 30, 2023. But in the first 11 days of January 2024, revenue fell by 40%, according to the chairman of the Suez Canal Authority.
The decline comes at a time when Egypt is already facing multiple economic challenges, including a plunge in natural gas exports, tourism, and worker remittances from abroad. These are the main sources of foreign currency for the country, which needs to import essential commodities and repay its massive foreign debt.
The Impact of The Attacks
The Houthi rebels, who control most of northern Yemen and are fighting a Saudi-led coalition, have claimed responsibility for several attacks on vessels in the Red Sea since October 2023. They say they are targeting Saudi Arabia and its allies, which have imposed a blockade on Yemen since 2015.
The attacks have prompted some of the world’s largest shipping lines, such as Maersk and CMA CGM, to reroute their vessels around Africa, adding thousands of miles and extra costs to their journeys. This has reduced the traffic and revenue of the Suez Canal, which normally handles about 10% of global trade.
The canal authority has tried to reassure shippers that it is taking measures to protect the waterway and its users, such as deploying naval forces and surveillance systems. It has also offered discounts and incentives to attract more customers. But some analysts say these steps may not be enough to offset the security risks and the competition from alternative routes.
The Need for Reforms
The loss of canal revenue adds to the pressure on Egypt’s government, which has been struggling to revive the economy after years of political turmoil and social unrest. The country has received billions of dollars in aid and loans from its Gulf allies and international lenders, but it has also had to implement painful reforms, such as cutting subsidies, raising taxes, and devaluing the currency.
These measures have helped to reduce the budget deficit, boost foreign reserves, and attract foreign investment, but they have also increased the hardship for millions of Egyptians, who face high inflation, unemployment, and poverty. The coronavirus pandemic has also worsened the situation, as it has disrupted economic activity and reduced tourism, one of the main pillars of the economy.
To cope with the crisis, Egypt has secured more financial support from the International Monetary Fund, the World Bank, and other sources. It has also launched several initiatives to diversify its economy, such as expanding its renewable energy sector, developing its industrial zones, and promoting its cultural and historical heritage.
Despite the challenges, some observers see signs of hope for Egypt’s future. They point to the resilience and creativity of its people, who have shown their ability to adapt and innovate in difficult times. They also highlight the country’s strategic location, rich resources, and diverse culture, which give it a competitive edge in the region and the world.
One example of this is the Grand Egyptian Museum, which is expected to open in 2024 near the pyramids of Giza. The museum, which will be the largest in the world dedicated to a single civilization, will showcase more than 100,000 artifacts, including the treasures of King Tutankhamun. The project, which has cost more than $1 billion and involved thousands of workers and experts, aims to attract millions of visitors and revive the tourism industry.
These projects, along with others, show that Egypt has the potential to overcome its current difficulties and achieve its long-term goals of economic development and social progress. But to do so, it will need to maintain its security and stability, and to pursue its reforms with transparency and accountability.
Source: Reuters
