Tourism and canal woes dent Egypt's economy

09 March 2016

Reports suggest up to 100 vessels have opted to go around South Africa rather than through the canal

If the latest pattern materialises into a trend and more ships opt out of the traditional route through the Suez Canal, Egypt’s economic predicament could deteriorate.

The Suez Canal represents one of the largest streams of hard cash revenue for an economy desperately dependent on foreign income from tourism and the waterway.

The reports suggest up to 100 vessels have opted to go around South Africa rather than through the canal. The move has been prompted by cheap oil, which allows ships to travel longer for cheaper.

The Egyptians are suddenly left with what could turn out to be another crisis if such a route becomes favourable for more ships. And with fees for using the Suez Canal sitting at approximately $350,000 a ship, Egypt may need to rethink its pricing strategy to avoid the waterway’s revenues declining further.

Any decline in foreign currency income is set to raise alarm bells in Cairo as an economic crisis rooted in the shortage of dollars continues.

For Egypt, hard cash often comes from three specific sources; tourism, the Suez Canal and large cash deposits from international lenders.

The reality being faced by Cairo at the moment is a tourism sector contracting at 46 per cent year-on-year, a Suez Canal witnessing declining revenues and an global economic environment that is making international lenders reluctant to support Egypt at this current moment.

What the Egyptians must do is unclear. Short-term solutions, as they have been in the past, must involve a bolstering of efforts to attract more cash from the Gulf and other international financial institutions.

But the long-term goal on the other hand is far more difficult as tourism and Suez Canal revenues show no signs of improving. Egypt’s worst nightmare could be materialising amid a government efforts to revitalise an ailing economy. 

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