CAIRO: Egypt’s economy is already in dire need of changes and outside assistance, but the country has suffered a severe new blow due to a dramatic decline in revenue following Houthi attacks at sea that forced commerce away from the Suez Canal.
All of Egypt’s primary foreign exchange earning sources—tourism, remittances from overseas workers, natural gas exports, and now the money from the Suez Canal—have recently and severely been put under strain.
Egypt requires foreign currency to pay off its $189.7 billion international debt, the most of which was accrued during the previous ten years, in addition to importing necessities to feed its people. This year, at least $42.26 billion in debt repayments are expected, however analysts anticipate that some of that will be deferred.
“Considering everything, it seems like Egypt’s crisis is getting close to a turning point,” Capital Economics’ James Swanston stated.
The Suez Canal Authority’s chairman reported last week that for the first 11 days of January, canal earnings had decreased by 40%.
Egypt received a record $8.76 billion from the canal in the year ending June 30, and an additional $2.40 billion in the third quarter.
Maersk’s CEO stated on Wednesday that he anticipated the shipping delays brought on by the attacks on vessels to likely last for several months.
Hundreds of commercial vessels have been told by Maersk and other major shipping lines to avoid the Red Sea and instead take the longer route around Africa.
“It would be a major setback if the decline in Suez Canal revenue keeps up. Since the government directly benefits from foreign exchange earnings, it’s a significant loss, according to Allen Sandeep of Naeem Brokerage.
If not the government directly, other sources of income like worker remittances that are mostly sent to private citizens nevertheless support Egypt’s foreign exchange situation.
According to central bank statistics, remittances decreased by $9.85 billion in the fiscal year that concluded on June 30 and by an additional $1.93 billion in the quarter spanning July through September.
Egyptians living overseas have been hesitant to send money home because of the high rate of inflation and fixed exchange rate that significantly undervalues the currency on the black market.
Before the Gaza crisis started on October 7, the pound’s black market currency was 39 to the dollar. Now, it is roughly 57 to the dollar. Since March, the official rate has stayed at 30.85 to the dollar.
With December’s inflation rate of 33.7%, it reached its highest point since June.
