A severe drought that began last year has forced authorities to slash ship transits by 36% in the Panama Canal, one of the world’s most important trade routes.

The new cuts announced on Wednesday by authorities in Panama are set to deal an even greater economic blow than previously expected.

Canal administrators now estimate that dipping water levels could cost them between 500 million US dollars (£395 million) and 700 million dollars (£551 million) in 2024, compared to previous estimates of 200 million dollars (£157 million).

One of the most severe droughts to ever hit the Central American nation has stirred chaos in the 50-mile maritime route, causing a traffic jam of boats, casting doubts on the canal’s reliability for international shipping and raising concerns about its affect on global trade.

On Wednesday, Panama Canal administrator Ricaurte Vasquez said they would cut daily ship transits to 24, after already gradually slashing transits last year from 38 a day in normal times.

“It’s vital that the country sends a message that we’re going to take this on and find a solution to this water problem,” Mr Vásquez said.

Mr Vasquez added that in the first quarter of the fiscal year the passageway saw 20% less cargo and 791 fewer ships than the same period the year before.

It was a “significant reduction” for the country, Mr Vasquez said.

But the official said that more “efficient” water management and a jump in rainfall in November has at least enabled them to ensure that water levels are high enough for 24 ships to pass daily until the end of April, the start of the next rainy season.

Canal authorities attributed the drought to the El Nino weather phenomenon and climate change, and warned it was urgent for Panama to seek new water sources for both the canal’s operations and human consumption.

The same lakes that fill the canal also provide water for more than 50% of the country of more than four million people.

“The water problem is a national problem, not just of the Canal,” Vásquez said. “We have to address this issue across the entire country.”