Egyptian economy and Suez Canal in difficulty in the face of Houthi attacks

For three months and the start of the war between Israel and Hamas, the Houthi rebels have increased attacks against ships in the Red Sea. Attacks which cause a drop in commercial traffic in the Suez Canal and worry the Egyptians.

Normally, 12% of world trade passes through the Suez Canal. But in recent weeks, the ballet of cargo ships has suddenly slowed down. “So far, reports indicate a 14% drop over the last month”explains Timothy Kaldas, associate researcher at the Tahrir Institute for Middle East Policy.

Since the start of the conflict between Israel and Hamas on October 7, 2023, nothing has gone well in the Red Sea and Egypt is one of the main countries to pay the price. Houthi attacks on numerous ships are leading to a collapse in traffic in the Suez Canal, a major source of revenue for the Arab world’s most populous country. If the situation were to continue, Egypt could encounter serious difficulties, even though it is already going through the worst economic crisis in its history.

The Suez Canal brought $9 billion to Egypt in 2023

“Most major international shipowners have turned away from the route to avoid Houthi attacks”, says Timothy Kaldas. A vital shortfall for the country. Last year, revenues from the Suez Canal brought Egypt nearly $9 billion. “This income represented around 2% of GDP last year. But the most important thing is that this capital arrives in hard currency”, recalls the researcher. This crisis comes at the worst time for the country, which has been facing a major liquidity crisis for several years now.

“Any further reduction in foreign currency resources will further destabilize the Egyptian pound, which has already lost 50% of its value since the beginning of last year.”

Timothy Kaldas, researcher associated with the Tahrir Institute for Middle East Policy.

at franceinfo

The Egyptian government is currently negotiating with major international shipowners to try to dissuade them from changing their route. According to the International Monetary Fund (IMF), volumes passing through the Cape of Good Hope, off the coast of South Africa, have already jumped by 67%.