Construction finally recommenced in 1881 but was hampered by geological and financial problems that bankrupted the original builders. It was completed in 1893, but, due to the canal's narrowness, navigational problems, and periodic closures to repair landslides from its steep walls, it failed to attract the level of traffic expected by its operators.

So it only became a thing somewhat recently.

It connects the Aegean Sea with the Ionian sea and it bypasses the Peloponnese peninsula, which is a relatively significant landmass. I guess the cost and the time/fuel savings might not be significant enough to modernize it. I wouldnt be surprised if they make it wider in the future.