Barran Press
On November 20, 2024, the International Monetary Fund (IMF) announced that ongoing tensions in the Red Sea have led to a staggering 70% drop in revenues from the Suez Canal, a vital source of foreign currency for Egypt. This statement followed the IMF's fourth review of Egypt's economic reform program, during which a $8 billion loan was discussed.
The IMF's report highlights that geopolitical conflicts, particularly the ongoing violence in Gaza and Israel, along with trade disruptions in the Red Sea, have significantly dampened economic outlooks for the region, including Egypt. The fund noted, "The fallout from these conflicts continues to adversely affect sentiment, resulting in substantial declines in Suez Canal revenues, which are critical for Egypt's foreign currency earnings."
Since October, the Houthi group, designated as a terrorist organization by many nations, has conducted missile and drone attacks against commercial shipping vessels in the Red Sea, leading many ships to avoid the canal in favor of the more expensive route around the Cape of Good Hope.
The IMF also raised concerns about the increasing number of refugees, which adds financial pressure on public services, particularly in the health and education sectors. The fund emphasized that the Egyptian authorities must enhance local revenue generation, mitigate financial risks—especially those related to the energy sector—and expand social safety nets.
Egypt has faced significant inflation this year, peaking above 35%, before recently declining to around 26%. In March, the country entered into a financial support agreement with the IMF, which included a comprehensive economic reform agenda aimed at addressing the global economic crisis that has escalated prices for goods and services in Egypt.
As part of the deal, Egypt is expected to implement reforms such as transitioning to a flexible exchange rate system, reducing infrastructure spending, and empowering the private sector, according to the Egyptian Information Authority. Following the third review in June, Egypt received an $820 million disbursement from the IMF.