After record revenues over the past two years, Egypt is expecting a sharp drop in revenues from the Suez Canal. Due to Israel's war in Gaza and attacks by the Houthis in Yemen, in support of the Palestinians, many ships have deserted this sea route, despite the additional costs involved in bypassing Africa.

This is what we call "collateral damage". Israel's war on Gaza is having a negative impact on the Egyptian economy, particularly on its two rentier resources: tourism and, above all, the income generated by transit rights through the Suez Canal. Bear in mind that over 12% of world trade passes through the Suez Canal.

However, with Israel's war on Gaza and Houthi attacks on ships using this shipping route, maritime traffic has fallen sharply.

Following the onset of attacks on ships using this shipping route, four of the world's five largest shipowners decided to change the trajectories of their vessels, preferring to bypass Africa. For them, this means at least 10 more days' travel time, and therefore significant additional costs for fuel, wages and crew.

According to a report by the Allianz insurance group, unveiled on Wednesday May 22, "more than a hundred ships have been targeted by Houthi rebels in the Red Sea, in reaction to the ongoing conflict between Israel and Hamas in Gaza. These attacks have severely affected transit via the Suez Canal, down by 40% at the start of 2024".

The consequences for revenues generated by passage fees are significant. The Egyptian authorities are expecting a catastrophic year in 2024, after a record year in 2023 for revenues from the sea passage linking the Red Sea to the Mediterranean of around 10 billion dollars.

According to Egypt's Minister of Finance, Mohamed Maait, revenues from the Suez Canal are set to fall by around 60%. Last April, the Minister of Planning and Economic Development, Hala El-Said, announced that revenues from the Suez Canal had fallen by 50% due to tensions in the Red Sea.

This situation is having a negative impact on Egyptian foreign exchange earnings, which depend on four main resources: export revenues, diaspora remittances, tourism revenues and income generated by the Suez Canal.

Karim Zeidane