The attacks on ships in the Red Sea may have negatively impacted Egypt’s economy, causing significant losses in Suez Canal revenues, but they also catalyzed essential economic reforms, according to Hisham Ezz Al-Arab, CEO of Egypt’s Commercial International Bank.
As of the first quarter of 2025, the bank holds assets worth 1.263 trillion Egyptian pounds ($25.3 billion). Al-Arab highlighted how the instability in the Red Sea prompted the Suez Canal Authority to diversify its income sources through dry docks, shipyard construction, and manufacturing zones. He noted, “With a decline in tourism during the Gaza conflict, the government expanded manufacturing and services under the Suez Canal Authority to offset foreign currency losses.”
Egypt has been grappling with its worst economic crisis in over 60 years, driven by foreign currency shortages, rising debt, and high inflation, largely influenced by global events such as the pandemic and the Ukraine war. The country’s reliance on imports from the Black Sea, especially for wheat and fertilizers, made it vulnerable to external shocks.
Further geopolitical tensions, including the 2023 Israel-Hamas conflict and Houthi attacks on commercial ships in the Red Sea, disrupted Suez Canal traffic—a critical source of foreign exchange. A December 2024 Bloomberg report estimated that these disruptions cost Egypt at least $7 billion in lost canal fees. Previously, the canal handled about 12% of global trade and contributed roughly 2% to Egypt’s GDP.
Despite these challenges, Al-Arab believes Egypt’s response could yield long-term benefits. He emphasized the importance of shifting from raw material exports to value-added goods. Regional instability, including the brief Israel-Iran conflict in June, revealed Egypt’s dependence on energy imports. When Israel temporarily closed its Leviathan gas field—an important source for Egypt’s domestic consumption and LNG exports—it exposed Cairo’s vulnerabilities.
Egypt has long aimed to become a regional gas hub since the Zohr gas field, the largest in the Mediterranean, began production in 2017. However, declining output due to technical issues has slowed progress. Al-Arab stressed that Egypt should not export gas until local demand is fully met.
He advocates for a broader economic shift toward semi-manufactured goods, which he believes would increase revenue and strengthen economic resilience. “The value from exporting processed leather or sand is significantly higher than raw materials,” he said. “We must begin processing these goods domestically to spark an industrial revolution.”
Signs of economic recovery are emerging. Egypt’s currency crisis peaked in early 2023 when the Egyptian pound lost more than half its value against the US dollar. Since then, monetary tightening, flexible interest rates, and structural reforms—including privatizing state-owned enterprises—have helped stabilize the economy. These efforts secured an $8 billion IMF bailout in March 2024.
By May 2025, inflation had dropped from 38% in September 2023 to 17%. Foreign investment is returning, notably a $35 billion Emirati-backed tourism development in Ras El Hikma, with more investments expected from Qatar and Kuwait. Remittances and tourism have also rebounded.
In addition to renewed foreign interest, domestic liquidity has improved, allowing businesses in industrial and service sectors to resume stalled investment plans, Al-Arab explained. He added, “As Egypt’s macroeconomic environment improves, investor confidence is cautiously returning, with both portfolio and strategic investors revisiting Egypt as a viable frontier market.”
Concerns over currency stability are also easing. “In recent months, investors no longer start conversations with exchange and interest rates,” he said. “It’s no longer a topic of discussion.”
— news from AL-Monitor
— News Original —
How Red Sea attacks prepared Egypt’s economy for future shocks
The Red Sea ship attacks may have dented Egypt’s economy, costing billions of dollars in lost Suez Canal fees, but they also forced much-needed change, according to the head of Egypt’s third-largest private bank.
Hisham Ezz Al-Arab is CEO of Egypt’s Commercial International Bank, which boasts 1.263 trillion Egyptian pounds ($25.3 billion) in assets as of the first quarter of 2025.
“The Red Sea instability pushed the Suez Canal Authority to start to diversify their revenues through their dry docks in terms of maintenance, shipyard buildings and manufacturing areas,” Al-Arab told Al-Monitor.
“As inbound tourism to Egypt fell during the war in neighboring Gaza, the government moved to diversify the Suez Canal Authority revenues, by expanding manufacturing and its services, to compensate for the foreign currency losses.”
Egypt has spent the past three years navigating its worst economic downturn in six decades, triggered by a combination of foreign currency shortages, surging debt and high inflation, much of it linked to global shocks like the COVID-19 pandemic and the Ukraine war. The country’s dependence on Black Sea imports, particularly fertilizer and wheat, left it exposed.
Then came new geopolitical blows. The Hamas-Israel war that began in October 2023 disrupted tourism, while Houthi rebel attacks on commercial vessels in the Red Sea choked Suez Canal traffic — one of Egypt’s top sources of foreign currency. According to a December 2024 Bloomberg report, the disruptions cost the country at least $7 billion in canal fees. The man-made waterway previously carried around 12% of global trade and contributed roughly 2% of Egypt’s GDP.
However, Al-Arab sees long-term upsides in how Egypt is responding.
Value-added exports over raw materials
The regional instability, including June’s 12-day Israel-Iran war, has exposed Egypt’s reliance on energy imports. After Israel temporarily shut down its Leviathan gas field, which supplies 15–20% of Egypt’s gas consumption as well as its LNG export terminals, Cairo’s vulnerability became clear.
Egypt has long aspired to become a regional gas hub, especially since its Zohr gas field, the largest in the Mediterranean, began production in 2017. But declining output, partly due to breakage, has limited progress. Al-Arab is blunt: Egypt shouldn’t export gas if it can ‘t meet local demand first.
At the core of his argument is a broader call for Egypt to pivot from exporting raw materials to semi-manufactured goods, a shift he believes would boost revenues and improve economic durability.
“The added value from exporting processed leather or sand is by far superior to the value we get from exporting raw materials,” he said. “We need to start processing these products through domestic manufacturing. That will be enough to ignite a major industrial revolution.”
Signs of turnaround
Egypt’s economic crisis peaked in early 2023, when the pound lost over half its value against the US dollar. Since then, monetary tightening, a flexible interest rate regime and a commitment to structural reform, including a privatization program for state-owned companies, have helped stabilize the economy. These reforms also helped secure an $8 billion bailout from the International Monetary Fund in March 2024.
One year later, the future looks brighter. Inflation dropped from 38% in September 2023 to 17% in May 2025. Foreign investment has returned, most notably through a $35 billion Emirati-backed tourism project in Ras El Hikma, and more Gulf investment is on the way. Qatar and Kuwait have already announced that they will pump millions into the country. Remittances and tourism have also recovered.
In addition to the renewed foreign interest, the new monetary policy has also brought improved liquidity among domestic Egyptian banks, meaning businesses in the industrial and services sectors are now better positioned to resume delayed investment plans, Al-Arab said.
“As Egypt’s macroeconomic environment continues to improve, investor confidence is cautiously returning, with both portfolio and strategic investors beginning to revisit Egypt as a viable frontier market opportunity,” Al-Arab said.
Even concerns over the currency ‘s stability appear to be fading.
“For the last several months, in my meetings with investors, they are not opening the conversation with the exchange and interest rates anymore,” he said. “It’s no longer a subject of discussion.”