Northwest of Suez: The 1956 Crisis and the IMF

IMF Working Papers, December 1, 2000

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Egypt’s nationalization of the Suez Canal in 1956 and the failed attempt by France, Israel, and Britain to retake it by force constituted a serious political crisis with significant economic consequences.
For the United Kingdom, the event engendered a financial crisis.
All four of the combatants sought and obtained financial assistance from the IMF, an outcome described as highly unusual for the time and having a profound effect on the development of the Fund.
The case study illustrates the complexities in isolating the current account as the basis for determining a balance of payments “need”.
The speculative attack on sterling—and the Fund’s response to it—are described as remarkably similar to financial crises in the 1990s.

The crisis highlighted the difficulty of using the current account alone to determine balance of payments “need”.
The participation of multiple combatant countries (Egypt, France, Israel, United Kingdom) in seeking IMF assistance is emphasized as an atypical historical episode that influenced IMF development.
The episode is used as an historical comparison point: the speculative attack on sterling and the IMF’s response showed dynamics akin to financial crises that occurred in the 1990s.

Subjects: Balance of payments, Banking, Credit, Currencies, Current account, Exchange rates, Financial crises, Foreign exchange, Money
Keywords: Britain's role, Credit, Currencies, Current account, director of research, exchange rate, Exchange rates, Financial Crises, financial crisis, fledgling history, Fund assistance, Fund resource, funding request, IMF, Middle East, Suez, Suez crisis, trade diversion, U.K. authorities, U.K. economy, WP

Nothwest of Suez: The 1956 Crisis and theIMF - WP/00/192
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