In a bid to enhance its pivotal role in global trade, Egypt is contemplating additional expansions to the Suez Canal, aiming to extend and finalize a second channel of the waterway. The head of the canal announced this development on Monday, emphasizing its potential to accommodate higher volumes of shipping and prevent disruptions that could impede traffic flow.
The decision comes amidst a significant decline in revenue for the canal, largely attributed to shipping companies diverting away from the route. This diversion is a response to attacks by Houthi militants in Yemen targeting ships in the Red Sea. The proposed expansion would build upon existing efforts to elongate the second channel by 10 kilometers and to deepen and widen sections of the canal. These initiatives were accelerated following the incident involving the Ever Given, a massive container ship that ran aground in March 2021, causing a six-day halt in traffic.
As a crucial source of foreign currency for Egypt, the Suez Canal plays a vital role in the country's economy. Egypt previously invested approximately $8.2 billion in an expansion project completed in 2015, which included the construction of a parallel waterway spanning 35 kilometers.
Although canal revenues experienced a gradual increase, they fell short of official projections. Reaching a record high of $9.4 billion in the financial year ending in June 2023, revenues plummeted by at least 40% at the beginning of this year due to the aforementioned Houthi attacks. Initial assessments for the proposed expansion are estimated to take around 16 months, encompassing feasibility, environmental, and engineering studies, alongside soil and dredging research, according to Suez Canal Authority (SCA) Chairman Osama Rabie.
The financing for the project is anticipated to be sourced from the SCA's investment budget, thus alleviating any additional strain on the state's general budget. Rabie asserted that such an expansion could bolster the canal's competitiveness and capacity to accommodate larger vessels.
Critics, however, have raised concerns about the financial implications of such mega-projects, citing their contribution to Egypt's foreign currency shortages and escalating debt burden. In response, officials have pledged to curtail spending on non-essential endeavors amid worsening foreign currency shortages over the past two years.
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