The Egyptian state-owned Suez Canal Authority has suffered huge economic losses over the last eight months due to escalating geopolitical tensions in the region, Egyptian economists have said.
Attacks on shipping vessels carried out by Yemen's Houthi group have pushed shipping companies away from the Suez Canal, which is a key source of revenue for Egypt.
From a record 9.4 billion US dollar annual revenues earned in the 2022-23 fiscal year to a drop of 25 percent in revenues the following year, Egyptian President Abdel Fattah El Sisi said the conflict in Gaza, which erupted last October, has now pushed Suez Canal revenues down by 60 percent.
Retaliation attacks carried out by the Houthis in Yemen on shipping vessels, which they say is to show solidarity with Palestinians under Israeli attacks in the Gaza Strip, are the main reason behind the steep drop in earnings.
As Israel escalates the war to include Hezbollah in Lebanon, Egypt fears more losses.
"We hope this doesn't turn into a comprehensive full war, because no country, not even Israel can afford that. These geopolitical disruptions appear to be staying longer, which will deepen our losses. Middle East markets have been suffering the economic impacts of the Russian-Ukrainian war followed by Gaza and now Lebanon," said Ayman Fouda, a board member of the African Economy Council in Cairo.
The Suez Canal is one of the main sources of foreign currency revenues for Egypt. This sharp drop in earnings comes at a time when Egypt is facing a shortage of foreign currency which has affected the North African nation's economy.
"We not only have a foreign currency crisis, but there are debt payments bound to specific dates. The State is already selling its assets to other countries. It is also getting rid of some national projects to save foreign currency. The Suez Canal revenue drop complicates the crisis and that will affect millions of people," said Mohamed Ali Ibrahim, a professor of economics at the Arab Academy for Science and Technology.
Israel's attacks in Lebanon have escalated in recent days as fears of an all-out war with Hezbollah mount amid concerns of a prolonged conflict in the region. The growing tensions is likely to drive more shipping vessels away from the Suez Canal and further deepen Egypt's economic crisis.
"The number of ships crossing the Suez Canal has dropped sharply, which also means the volume of goods has dropped. This has created a shortage in funding the expansion and development projects in the Canal. It also creates more incentives for shipping companies to push for other alternatives like the North Pole and the Cape of Good Hope," said Ibrahim.
Egypt suffers economic losses as geopolitical tensions divert traffic from Suez Canal
