CAIRO: In continuation of a downward trend, Egypt’s Suez Canal revenues dropped 21 percent to $327.9 million this past March from $416.9 million the previous year, according to a government statement released Sunday.
Although the figures for March are an improvement on February’s earnings, which were the lowest since April 2006 at $301.8 million, Suez Canal revenues are expected to continue dropping steadily into the next fiscal year as a result of the ongoing financial crisis.
The number of vessels using the waterway last month was 1,439, down from 1,699 in March 2008. In February 2009, only 1,272 ships passed through Suez, a five-year low in canal traffic.
The Suez Canal Authority kept its transit tolls for 2009 the same despite expectations that the global financial crisis would reduce traffic, a move that might have put the canal at a disadvantage compared to competition routes such as the Cape of Good Hope which charge lower fees.
The fee imposed for crossing the canal depends on a ship’s size, weight and cargo.
Aside from the impact of the global financial crisis on international trade, seasonal factors and the threat of piracy in the Gulf of Aden have been cited to explain the slowdown in revenues from the canal over the long term.
Historically, the months of February, June and September have seen lower canal revenues due to seasonal factors, which could partially explain the particularly low numbers this past February and the slight recovery for March.
Experts disagree on the impact of piracy on the canal’s productivity, with some citing global crisis as the overarching factor for the slowdown, as piracy impacts a variety of trade routes, not just the Suez Canal. Others believe that the threat of piracy in the Gulf of Aden is enough to push some companies to bypass the canal in favor of less direct routes.
The Suez Canal is a vital source of foreign currency for Egypt, along with tourism, oil and gas exports and remittances from Egyptians living abroad. It is also a contributor to Egypt’s economic growth, constituting 0.7 percent of Egypt’s 7.2 percent overall growth for the 2007/2008 fiscal year.
The recent decline in canal revenues is part of an overall trend of slowing growth in these sectors.
Magdy Sobhy, an economics expert at Al-Ahram Center for Strategic Studies, predicts that the decline in revenues from the canal will impact the Egyptian pound and foreign currency reserves more than the economy as a whole.
“The canal isn’t a huge part of the overall economy, maybe $5-6 billion out of a total of $130 billion in annual revenue. However, the canal is one of the main sources of foreign currency and I think that reduced activity in the canal will really impact the Egyptian pound, the central bank and the reserves of foreign currency over time, he said.
It appears that revenues from the canal can be expected to continue dropping for the foreseeable future. Cairo investment bank EFG-Hermes expects total revenues for the canal to drop 10 percent for the 2008/2009 fiscal year from $5.1 billion in 2007/2008, and a further 25 percent in the coming fiscal year beginning July 1.
