In a Thursday speech extolling his government’s accomplishments, President Abdel-Fattah al-Sisi took a defensive line on the Suez Canal. “I heard people say the revenues of the Suez Canal decreased. Of course not! And when I say of course not, this is a responsible statement. Of course not. They increased,” he insisted.
Sisi’s statement appears to be an attempt to rebut widespread reports in local and global media that revenues from the Suez Canal declined by more than 5 percent in 2015.
All numbers are political in Egypt, but Suez Canal tolls are especially so in the wake of the August 2015 launch of a much-hyped canal extension officials claimed would contribute to more than doubling Suez Canal revenue to US$13.5 billion by 2023.
Although the president dismissed reports of declining revenue as something “people say,” the fact that the dollar value of Suez Canal tolls was about US$290 million less in 2015 than in 2014 is not exactly hearsay: The figure is available from the Suez Canal Authority itself, and the decline is reflected in Central Bank reports on Egypt’s Balance of Payments.
For most purposes, the dollar value is what counts for Egypt, because dollars are what Egypt needs. The currency dominates global trade and is overwhelmingly preferred for commodities like oil and wheat.
However, there are two other ways Egypt calculates revenue: in Egyptian pounds and in “Special Drawing Rights,” or SDRs, an imaginary currency that tracks the value of a basket of global currencies including the US dollar, the euro, the Japanese yen and the British pound.
In fact, as of 2016, these are the only two currencies for which the Suez Canal Authority gives data. All references to the dollar have been removed from SCA data tables for the current year.
Egypt does not accept payment canal tolls in Egyptian pounds, which makes sense given the waterway’s importance as a source of hard currency. Instead, the SCA accepts nine foreign currencies: US and Canadian dollars, euros, British pounds, Japanese yen, Swiss francs and Swedish, Norwegian and Danish krone.
This means that any report of revenue in pounds simply represents a conversion from some other currency. Presenting the data this way has some utility, since most of us use Egyptian pounds in our everyday lives. However, it can also be used to obscure larger trends.
Last month, state news agency MENA ran a report with the headline “Suez Canal revenues up 6.5% in 1st quarter of 2016.” Further, the report quoted SCA head Moheb Mamish as saying that canal revenue increased by 3 percent year-on-year in 2015.
Mamish was talking, it seems, about revenue in Egyptian pounds. What he doesn’t mention is the devaluation of the pound in that same period. At the end of the first quarter of 2015, the pound’s official exchange rate was LE7.53 to the US dollar, compared to LE8.78 in 2016 — a drop of 16.6 percent. Compared to that kind of devaluation, an increase of 6.5 percent doesn’t look like much to write home about.
This is where things get a little more complicated. Although the SCA accepts payment in the nine currencies listed above, tolls are calculated in SDRs.
SDRs don’t exist as a physical currency, but the International Monetary Fund puts out a daily exchange rate for them based on the performance of the currencies in the basket. So shipping companies pay in their choice of accepted currencies, based on that day’s SDR exchange rate.
Setting fees in SDRs rather than dollars allows Egypt to balance out its risk across a basket of currencies. It protects Egypt at times when the dollar is weaker than the Euro, the British pound or the Japanese Yen. But it means that when the dollar is out-performing the SDR as a whole, Egypt loses out. Since July 2014, that’s exactly what has happened.
Now, this chart looks like a bit of a hot mess, but the important thing to pay attention to is the relative position of the red and blue lines in each set. The lines for SDRs tell us how much billable freight was shipped through the canal. The lines for dollars show how many dollars the canal actually brought in. It’s clear that up until July of 2015, the amount of billable freight was greater than the previous year, but dollar revenue was less. This is thanks to the appreciation of the dollar against SDRs.
The Suez Canal Authority hasn’t made public the total SDR revenue for 2014 and 2015, but based on the monthly exchange rates it lists, we can calculate that SDR revenue was equivalent to roughly 3.6 billion in 2014, and increased by around 2.7 percent to hit some 3.9 billion in 2015.
In other words, if SDR were a real currency rather than an imaginary one, revenue would have actually gone up in 2015. (Although, sadly for boosters of the “New Suez Canal,” virtually all of that increase would have come before it launched in August.)
The SCA’s reports don’t include a breakdown of the actual currencies shipping companies pay in, which raises the intriguing possibility that the SCA could have collected more, say, euros or krone in 2015 than in 2014. But ultimately, however you do the math, canal revenues were worth less on the global market in 2015 than they were in 2014, and it’s too soon to say how 2016 will go.