The World Bank in the recent report Conflict and Debt in the Middle East and North Africa revealed details about potential losses that Egypt, the entire region and the rest of the world could suffer during the year due to the continuous attacks carried out by Houthis targeting merchant ships in the Bab al-Mandab Strait and the Red Sea.
Attacks on ships by Iran-backed Yemeni terrorists could further extend shipping times and make increase costs for several countries in the region. If geopolitical instability in the region increases, oil and capital markets may suffer and foreign investors may be less willing to lend to the region.
Egypt’s losses
For an economy of systemic regional importance such as Egypt’s, the vulnerability to crises of payments could be exacerbated by a longer-than-expected reduction in maritime traffic through the Suez Canal.
In the report we read that the decrease in traffic in the Suez Canal by up to 40 percent in 2024 could lead to losses estimated at 3.5 billion dollars, equal to 10 percent of Egypt’s net international reserves. The Suez Canal is a source of foreign currency for the country, with its revenue reaching $8.8 billion in the last fiscal year, accounting for 25 percent of net international reserves.
The attacks of Houthis intensified in recent times have caused a drastic reduction in traffic in the Suez Canal, 42 percent between the end of 2023 and the beginning of 2024, as reported by the World Bank. This decline not only undermines the security of international trade routes, but also has a direct impact on revenue and the Egyptian economy as a whole and repercussions on the economy of the entire region.
Price increase
Since last year, major international shipping companies have suspended their operations in the Suez Canal and have been forced to divert ships around Africa’s Cape of Good Hope, adding 7 to 10 days of travel. According to the report, “the economic impact of the conflict in Gaza has remained relatively limited on the rest of the region’s countries, but uncertainty has increased,” noting that long-term disruptions to traffic through the Suez Canal “could increase prices of basic necessities at a regional and global level”.
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