RAYMOND, Maine — Egypt’s fiscal year runs from July 1 to June 30. A few weeks ahead of the end of the fiscal year, Egypt’s finance minister released his predictions for the country’s total earnings. Finance minister Mohamed Maait expects the Suez Canal to reach at least $7 billion in revenue for Egypt, exceeding the expectations Maait had when entering the fiscal year in July 2021.
Suez Canal’s Necessity To Egyptian and Worldwide Trade Operations
The Suez Canal is historically known as one of the world’s most critical shipping routes. It connects European waters with the Arabian Sea, Indian Ocean and almost all countries in Asia-Pacific. As it is such an important route, when anything goes wrong in the Suez it can impact the supply chain and job operations globally, effectively causing mass disruption. Such economic impacts are best exemplified by the difficulties that hit the world’s supply and job chains when the Ever Given shipping tanker blocked the Suez Canal in 2021. The practicality and reliability of the Suez Canal make it well-known as the fastest route.
The canal is 120 miles long, and the second-quickest shipping route in that region is 4,300 miles. The Suez truly cuts travel time in half and many companies have come to rely on it. There are about 14,000 employees who work or connect to the Suez Canal Authority. Still, the internationally connected number of workers to the canal itself is much higher.
According to the New Zealand Ministry of Foreign Affairs and Trade, 12% of the world’s trade passes through the Suez. The aftermath of Ever Given’s shipping blockage best reflects the global trade and Egyptian economy on the Suez Canal. A study by Allianz predicted that the total economic losses during the stoppage between March 23 and March 29 for all companies (Suez Canal Authority and trade/shipping companies) could have amounted to $400 million per hour. The incredible losses mean that the Suez Canal’s exceeding financial expectations for the 2021-2022 fiscal year is even more impressive.
Suez Canal Exceeding Financial Expectations
In January 2022, Egypt’s government reported that the Fiscal Year 2020-2021 earned Egypt more than $6 billion due to the Suez Canal operations. According to Marine Insight in 2017, the Suez Canal’s earnings exceeded $5 billion, representing an upward trend in economic growth and annual revenue. About $5 billion remained as the average yearly earnings until 2020. Moreover, increased profits continue for the Suez Canal, exceeding the expectations.
The Suez Canal’s exceeding financial expectations means a boost for Egypt’s economy, job market and foreign currency reserve. Egypt has struggled financially since February as the war in Ukraine wages on, challenging the global markets and impacting the amount of trade and usage the canal sees. As Egypt’s foreign currency reserves build and strengthen, Egypt can take an even more dominant stance on the global markets. The increased foreign currency reserves and new international trade stance could allow Egypt to find ways to diversify its economy through trade, not simply passing through the country.
Can Egypt Build On This Economic Momentum?
Even though Egypt’s poverty rate is high at 27.9%, new developments reflect positive outlooks for Egypt’s economic future and job security. Despite the challenges stemming from the COVID-19 pandemic and the war in Ukraine, the Egyptian poverty rate has decreased by 0.7 percentage points. This decrease in poverty correlates to the necessity of the Suez Canal for Egypt’s economic growth.
The Suez Canal’s exceeding economic expectations shows potential investors that there is a chance for further business opportunities Egypt can be a part of. Several deals are underway in Egypt that connect to the Suez Canal’s exceeding economic expectations. Each new deal aims to increase job availability, the foreign currency reserve and decrease poverty rates. One such deal is the newly planned light-speed railway that will run alongside the canal. The deal should make transportation as easy and cheap for workers in the area as possible. Still, it has the side benefits of allowing more investments in the canal’s region.
The Suez Canal’s exceeding economic expectations will have positive rippling economic effects throughout Egypt. While the canal is a fantastic feature of Egypt’s economy, it is not the entire backbone. Even if the canal struggles, the economy does not come to a grinding stop. When the positive changes come from the Suez Canal, the positive effects can last a long time and bring about more economic improvements, such as the new railway.
– Clara Mulvihill