Egypt economy year in review: far from smooth sailing despite new canal

Flanked by warships and with fighter jets and helicopters roaring overhead, the historic presidential yacht Mahrousa carried a triumphant president Abdel Fattah El Sisi through Egypt’s newly opened channel alongside the Suez Canal.

The August 6 gala was the high point of a year otherwise marred by high inflation,stagnant growth and several unexpected disasters that have wreaked havoc on the Egyptian economy. The government, despite best intentions, has so far been unable to pull the country out of five years of malaise since the 2011 uprising.

Mr El Sisi stood on August 6 aboard the Mahrousa, the first ship to pass through the canal at the original 1869 opening, waving to onlookers onshore as folklore dance troupes performed. Egyptian flags adorned streets across the country.

“Egyptians have made a huge effort so as to give humanity this gift for development and construction,” the president declared amid a crowd of foreign leaders, including Sheikh Mohammed bin Rashid, UAE Vice President and Ruler of Dubai; the French president, François Hollande; the Russian prime minister, Dimitry Medvedev; King Abdullah of Jordan; the emir of Kuwait; and the king of Bahrain.

Built at a cost of US$8 billion, the new 35-kilometre channel runs parallel to the original 193km canal. The expansion also involves the deepening of 37km of channels through two lakes and has shaved off up to a day in waiting and transit time for ships using the waterway.

The government predicted it would boost the canal’s annual revenue to $13.23bn by 2023 from just more than $5bn in 2014. But in the few months since the opening, at least, year-on-year revenue has actually decreased as a slump in world trade cut into shipping.

Scarcely had 2015 begun when the Egyptian central bank began running out of foreign currency, throwing the economy into crisis. The bank let the official price of the pound weaken from 7.14 per dollar on January 18 to 7.60 two weeks later. It then tried to stamp out the black market, where the pound traded at 7.84, by restricting the amount of foreign currency companies could deposit into their bank accounts, making it hard for them to collect dollars for pay for imports.

The new currency regime was just in time for the Sharm El Sheikh economic conference in March, an extravaganza led by the president that gathered in thousands of investors in a show of support for the country and a sign that life was returning to normal.