CAIRO: After months of measured recovery, Suez Canal revenues experienced a setback this August, caused both by persistent sluggishness in the world of international trade and the predictable cyclicality of the canal.
Revenue hit its 2009 peak in July, registering $382.9 million in income. In August of this year, that number fell to $371.8 million.
Despite breaking what had become a general month-on-month upward trajectory, the most ominous news may be the fact that revenue continues dramatically to miss its high water marks of last year. Revenue for August of last year hit $504.5 million.
The last time that canal revenues fell on a month on month basis was in May.
Last August, though, was the exception rather than the rule. July typically represents the peak of summer trade, leading some analysts to suggest that this August’s declines might be marking a return to canal’s cyclicality, which was interrupted by the global economic crisis.
“Observation of seasonal trends indicated July is a month when revenues rose in recent years due to higher non-oil trade, said Reham ElDesoki, an economist at brokerage firm, Beltone Financial.
The latest drop in canal revenue is especially disheartening since July’s numbers recorded a robust 10 percent jump from June’s $348.2 million haul.
Mohamed Amara, from the Suez Canal Authority told Reuters that the number of ships passing through the canal also fell this month, hitting 1,453, down from 1,521 last month.
“We had expected to continue to see slight gains in revenue from the canal, but it looks like the worst is not behind us at this point, an anonymous official said, according to local media.
As important as revenue from the Suez Canal is to the Egyptian government, there is a tendency to overstate its real contribution to overall revenue.
Most analysts predict that the canal will haul in between $4 billion and $5 billion over the course of the current fiscal year that ends next June.
By contrast, the government announced earlier this year that it expects roughly LE 225 billion in overall revenue for the current fiscal year, while spending $323.9 billion.
Canal revenue, therefore, will represent little more than 2 percent of the government’s overall haul.
Where canal revenue is critical, though, is with regard to foreign currency. Most of the ships passing through the canal sail from Asia, en route to Europe. With many European trading lines in the mix, the government takes in strong currencies like the euro and the British pound.
This is especially important to a developing economy like Egypt because increased foreign currency reserves boost trade and stabilize the domestic currency.
Foreign currency reserves have fallen by more than 8 percent over the past year.
The 2008/09 fiscal year is now on the books, having registered an 8.4 percent decline in canal revenue. While nobody expects the 2009/10 fiscal year to reach the highs of two years ago, analysts have been hopeful that it could achieve a strong year-on-year recovery.
August’s results, though, call the strength of recovery seriously into question.