EGYPT – The Egyptian International Freight Forwarding Association (EIFFA), a key player within the Cairo Chamber of Commerce, has raised a red flag over the economic repercussions of the Red Sea crisis escalating shipping costs by up to USD 1 million.

The ripple effect of the Houthi attacks extends to the prices of various commodities and market stability.

The shift in shipping routes, particularly rerouting ships via the Cape of Good Hope, has significantly increased trip costs, with the extra expenditure in fuel for each round trip.

Alarming statistics reveal a staggering 170% surge in shipping import costs through the Bab al-Mandab Strait due to Houthi attacks targeting vessels associated with Israel and the United States. Consequently, shipping companies have suspended operations through this critical waterway.

The strategic diversion of ships from the Suez Canal to the Cape of Good Hope, situated in the southernmost part of Africa, has prolonged journeys between Asia and Europe by 10-15 days, effectively doubling transportation expenses.

Ahmed Al-Samdouni, a representative of EIFFA, underscored the adverse impact on Egypt’s foreign exchange reserves, given that the Suez Canal is a major contributor to the country’s foreign currency income.

Al-Samdouni remarked, “We started to be affected by the events in the Red Sea since the beginning of January, as companies with container ships and car transport ships switched to the Cape of Good Hope route instead of passing through the Red Sea and the Suez Canal.”

‘This also affects Egypt’s foreign exchange reserves, as the Suez Canal is a major source of foreign currency, which Egypt lacks.”

Highlighting the financial significance of the Suez Canal, he emphasized that the canal’s traffic fees constitute approximately 8% of the Egyptian government’s revenues and contribute significantly to the country’s foreign currency earnings.

The indirect effects, including increased prices of imported goods, heightened shipping and insurance costs, and potential alterations in destination due to heightened risks, compound the economic challenges posed by the ongoing disruptions.

In response to the escalating economic concerns, the Importers Division at the Cairo Chamber of Commerce, led by Emad Kenawy, has called upon the government to address external debt stabilization, seek extended repayment terms, and explore debt transfer options in 2024.

Advocating for complete exchange rate liberalization and unrestricted foreign currency deposits, the division also urged a temporary delay in importing finished products.

Kenawy stressed the necessity of prioritizing currency management for vital sectors such as food supplies, production inputs, and elements contributing to Egypt’s national security.

Additionally, he underscored the urgency of restoring the agricultural cycle system and boosting investments in agricultural, livestock, and poultry projects.

Simplifying loan procedures for small and micro-enterprises to generate employment opportunities was also emphasized by Kenawy, aligning with the broader objective of mitigating economic challenges stemming from regional tensions.

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