Egypt’s current account deficit soars as Suez Canal revenues plummet

Egypt’s current account deficit more than doubled to $5.9 billion in the July-September 2024 quarter, up from $2.8 billion in the same period last year, according to the Central bank on January 16.

A significant contributor to this widening deficit was a sharp drop in Suez Canal revenues, which fell by 61.2% to $931.2 million, down from $2.4 billion in the previous year’s first fiscal quarter.

The decline in canal revenues can be attributed to reduced shipping traffic, with the number of vessels passing through the Suez Canal plummeting by 51%. This was largely due to the heightened tensions in the Red Sea, where attacks by the Iran-backed Houthis on vessels have disrupted global shipping routes. These attacks, framed as acts of solidarity with Palestinians amid the Israel-Hamas conflict, have pushed shipping companies to divert their routes, further impacting Egypt’s vital revenue source.

Despite the challenges facing the Suez Canal, Egypt experienced positive developments in other sectors. Remittances from Egyptians working abroad nearly doubled to $8.3 billion, up from $4.5 billion in the same quarter of 2023. Additionally, net foreign direct investment inflows rose to $2.7 billion, compared to $2.3 billion last year, and tourism revenues also showed a modest increase, rising from $4.5 billion to $4.8 billion.

The drop in Suez Canal revenues and the increase in the current account deficit underscore the pressures Egypt faces in maintaining its economic stability. However, the growth in remittances and foreign investment offers some relief amidst the ongoing challenges.